SINGAPORE–(BUSINESS WIRE)–AM Best is maintaining a negative market segment outlook on
India’s non-life insurance market, supported by key factors that include
continued reliance on realized and unrealized investments gains to
offset technical losses, potential short-term disruption from regulatory
enhancements and persistently competitive and underperforming core
business lines of motor and agriculture.
As detailed in a new Best’s Market Segment Report, titled “Market
Segment Outlook: India Non-Life Insurance,” India’s non-life insurers
have been one of the main beneficiaries of the country’s fast-growing
economy, and the industry has seen a substantial increase in insurable
risks, largely driven by compulsory agriculture insurance. However,
heavy competition and cumbersome regulatory hurdles for product
development hinder technical performance, with most companies relying on
strong investment income derived from the exceptional performance of
Indian equities, which have shown sustained outperformance relative to
global indices. The market’s combined ratios has fluctuated between 110
and 125 over the past five years, and most insurers have become
dependent on investment income to generate profitability. The
sustainability of such earnings may put the long-term viability of many
insurers into question.
Motor insurance, which consists of own damage and third-party liability
(TPL), continues to dominate the non-life insurance market, generating
about 40% of premium volumes. Market results indicate that the segment’s
incurred loss ratio has improved over time. However, the size of the
reserves for this line relative to capital remains very significant.
Although insurers have strengthened reserves in recent years, concerns
about the prudency and potential for tail development remain, given that
some claims may get caught up in India’s slow-moving court system.
Unfavorable reserve adjustments have the potential to significantly
impact current performance and capital even more so, given the lack of
profitability in many other lines.
A mandatory crop insurance scheme, launched in 2016 to provide insurance
coverage to farmers, has provide a premium boost to non-life insurers,
catapulting agriculture premiums to INR20.6 billion in fiscal-year 2017
from INR5.3 billion in fiscal-year 2016. However, the scheme recently
has come under criticism due to volatile loss ratios given the wide
variances between the country’s two main cropping seasons, as well as
reported numerous delays on claims settlements.
Despite the negative outlook, AM Best recognizes that some non-life
insurers still may experience growth. The profitability and capital
strength of companies that demonstrate sound risk management practices
and disciplined underwriting likely are to improve steadily.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=285783.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
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Contacts
Myles Gould
Associate Director, Analytics
+65
6303 5020
[email protected]
Mahesh Mistry
Senior Director, Analytics
+44
20 7397 0325
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Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
[email protected]
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
[email protected]
