Unfazed by new players, GIC Re gears up to reclaim market share

The reinsurer posted a net profit of ₹6,701 crore for FY25, higher than ₹6,497 crore in the previous year. Earned premium for the year stood at ₹36,130 crore compared to ₹33,576 crore in FY24.

Combined ratio, a profitability metric that indicates whether an insurer is making an underwriting profit or loss, improved to 108.8% for FY25 from 111.8% in FY24. Ramaswamy Narayanan, the company’s managing director and chief executive officer, is aiming to bring this to below 100% over the next 6-7 years. Underwriting loss for the year reduced 16.4% to ₹3,352 crore.

In an interview with Mint, Naranayan said the company is unfazed by the entry of new private players and falling market share, and the focus is now on profitability and improving the combined ratio.

“Today, I have the capital and the solvency. Going forward, GIC will write big-ticket shares in areas where there is profitability, growth and which gives us diversification. You will not see us writing the same classes again. We will look for opportunities elsewhere and that is where I see the strength of this company.”

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Narayanan attributed the fall in the company’s market share in the domestic market from 60% to below 50% over the past 3-4 years to the increased size of the sector, entry of new players and more business being written by other existing players at a time when GIC itself was de-growing. Even so, GIC Re continues to write a big share in India, he said.

“The phase of de-growth and consolidation is done,” Narayanan said, adding that growth going forward would be with profit.

Reinsurance is insurance for insurance companies–insurers transfer their risk to another company to reduce the likelihood of large payouts for a claim. Reinsurers allow insurers to remain solvent by recovering all or part of a claim payout.

Obligatory business

Despite increasing calls for cessation of the obligatory business to GIC Re, Narayanan is confident that even if the obligatory business component is removed, GIC Re will only see a short to medium term impact.

His confidence stems from the other-than-obligatory business that the reinsurer does today, called ‘voluntary quota shifts’. This includes insurers which may feel that just giving 4% of business to GIC is less and may want the company to write more. “So even if this 4% goes, I will get it back in voluntary quotations. I have no issues there,” he said.

Under the obligatory business arrangement, all insurance companies in India are required to get 4% of their reinsured portfolio covered by GIC. In exchange, GIC gives a certain commission back to the insurance companies.

“Will it hurt GIC if the entire 4% goes in a stroke? We will have issues explaining that obviously. Rating agencies will start worrying about what the business mix is going to be and how is it going to work? But I think over a period of time we will easily get it back,” he said.

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Narayanan emphasised that GIC’s obligatory business has continued to grow despite the mandated percentage being reduced over the years from 20% to now 4%, purely because the overall market is growing. Currently, the obligatory business accounts for around 30% of the reinsurer’s revenue, which is expected to fall considering the business consolidation undertaken by the company during 2020-2024.

“We really cut off a lot of loss-making businesses. So at that time, the obligatory business grew but other segments de-grew,” he said, adding that this share in revenue could fall to about 25% by next year. The eventual plan is for the obligatory business to account for 25% of the business, international business for another 25% and balance 50% is the domestic business.

Diversification

Part of the growth strategy is also expanding the international business in order to diversify geographical risk for the reinsurer, especially for ‘natcat’ or natural calamities-related and political risk-related losses. This is done through sophisticated models to optimise capital management, Narayanan said, adding that while markets like the US may see more such incidents, the pricing is much better there compared with India, making it much easier to recoup losses.

“That is somewhere we have to improve because India is catching up in terms of the frequency and severity of incidents. And unfortunately, while climate change is a reality, a lot of these losses in India are due to how we manage our cities and how they are growing,” he said.

In October 2024, global rating agency AM Best upgraded GIC Re’s credit rating to ‘A-’ from ‘B++’. Beginning of calendar year 2025, the company started growing the international business. The reinsurer currently has overseas branches in Malaysia, South Africa and a subsidiary in the Lloyds marketplace in UK.

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The second leg of diversification is being done through expansion into new product lines with the reinsurer now looking to write more health and motor insurance business—the two fastest growing segments within general insurance.

“We were pretty underweight on health. So we spoke to a lot of companies and we saw areas that could be of interest to us,” Narayanan said.

Competition

Narayanan said he is not worried by the entry of private players into the market as he believes that GIC Re has always been a global player and its competitors multinational reinsurers and not domestic insurance companies.

This includes Irdai awarding the reinsurance licence to Valuattics Reinsurance—marking the entry of the first private reinsurer to operate from within India. Narayanan believes the regulator could be open to awarding more such licences.

“The point is, reinsurance is more capital hungry. So companies with deep pockets will need to come in. If they apply, I’m sure they will get it because Irdai wants more players to come into the market,” he said, adding that it should not impact GIC’s business because every company has their own way of getting business. While there is no shortage of business in India, a bigger issue is that India is perceived to be a very cheap market due to low pricing.

“Our competitors have always been, and even today, are multinational companies. I’m not competing with New India Assurance or Life Insurance Corporation. I’m really working with them and competing with Munich Re and Swiss Re and Hanoi,” he said. In the face of this competition, what is expected to hold GIC in good stead is its long-standing partnerships that it has built over decades, he said.

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“GIC’s relationships are more institutional. It’s not about one person, but about the kind of support that we can give as an institution,” Narayanan said, adding that as such, GIC does not work like a “typical PSU” as it doesn’t have too many offices or people and is a very lean organization. GIC Re currently has around 458 employees including recent recruitment of 80-85 people.

HR overhaul

Acknowledging the constraints that come with being a state-owned entity, Narayanan believes that GIC Re is trying to do things “very differently”. Hiring and human resource management is a key agenda for the organisation going ahead with Narayanan saying that while the reinsurer might not always be able to match its competitors’ salaries, it is trying to offer value to employees in terms of work opportunities, differentiated training and learning across various lines of business as employees grow within the organisation. The objective is also to ready a second line of managers to take over the senior’s role in case of exits or transfers.

A lot of these HR-related changes are part of ‘Project Parivartan’–introduced in 2022 and being spearheaded by KPMG, which GIC Re has hired as an external consultant to advise on the overhaul of its HR practices. The mandate for KPMG is to review existing HR practices and suggest global practices that can work within the PSU structure and factoring in the expertise required for this niche business.

“We have tried to see how we can restructure, also in terms of reducing hierarchy and red tape and creating clarity in what employees are doing and their role,” he said.

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