India has all the ingredients to become a reinsurance hub: G. Srinivasan, Galaxy Health & Allied Insurance

According to industry experts, the combination of large carriers, a sizeable market, reinsurance talent, a long-standing insurance market history, and connections to other major markets globally, suggests India is poised to establish itself as a global reinsurance hub.

During a recent panel discussion moderated by G. Srinivasan, Managing Director (MD) and Chief Executive Officer (CEO), Galaxy Health and Allied Insurance Co. Ltd, insurance and reinsurance market experts debated the potential for India to develop into a global hub for reinsurance business.

“India being a reinsurance hub is something we have been hearing at least for a decade,” said panel moderator Srinivasan.

“The aspiration of the policymakers is that India should emerge as a reinsurance hub, at least as a regional hub, if not for the whole world. India has everything – big players in the market, a relatively big market, reinsurance talent, and long insurance history, as well as connections to the major markets in the world. So, India has all the ingredients to become a reinsurance hub, but somehow it has not happened at the speed at which we would have liked that to happen.”

Against this backdrop, Srinivasan questioned panellists Ramaswamy Narayanan, CMD, GIC Re, Amitabha Ray, CEO of India for industry giant Swiss Re, Franz Josef Hahn, CEO of Peak Re, and Shasi Nair, CEO, Berkley Insurance Asia, on what needs to happen to make India a reinsurance hub over the next three years or so.

According to Ray, establishing India as a reinsurance hub over the next three years requires talent, risk appetite, underwriting, support and excellence.

He explained, “All these ingredients, when they are there, in the right measure and with some financial incentives like tax, will make it a hub. A hub is a marketplace where people come to transact global reinsurance business, an aggregation of all the risks floating around, a place where all this risk is consolidated and parcelled out to the risk takers. It has to be a very free marketplace to do business because it completely has to be fungible in terms of capital. The risk will seek capital for the right return, the capital needs to come in and go out as and when, for the flexibility that it requires to be a properly functioning marketplace in terms of demand, supply, etc.”

At the same time, Ray warned that too many onerous regulations or localization, which hinder the fungibility of capital, prevent bringing global expertise. “All those things are not conducive to making that hub. We have talent in India, capital income and the underwriting excellence that will make this a viable hub,” he said.

Nair discussed a slightly different route with a focus on India not trying to replicate the ingredients already present in other hubs, like Singapore or DIRC.

“Maybe there are other ways to skin the cat,” he said. “Rather than saying, I want to try and become a region so I can compete with the established players, what about sort of picking up a few lines of business and becoming an exchange for that?

“India has demonstrated its leadership in a couple of way, in agriculture, ILS, captives, and cyber. Why don’t we start with and sequential this and say, well, let’s try and make this as a centre, as an exchange toward them, you build the talent and build a pool. Certainly, I think GIFT is in the right direction, and I think it has a lot of potential for that.”

As noted by Nair, the Indian government has established a “GIFT-City” (Gujrat International Finance Tec-City), an initiative to inject capital into the market by allowing foreign reinsurers to set up shop in India. The city will be established in Gujrat with the backing of the International Financial Services Centres Authority (IFSCA) as they look to increase the ease of doing business through more concise regulations.

Hahn, from his experience in establishing Peak Re in Hong Kong, emphasised how important connectivity is. He explained that at the time of his firm’s inception, it was difficult to find specific talents in Hong Kong.

“Hong Kong is also a pool of many towns with very strong universities. But in reinsurance, you need different kinds of specialists. You need a lighthouse, people who can guide in certain lines of business, and we needed very mature immigration offices, who understood how to support the building up of a company like this,” he said.

Hahn also highlighted the importance of infrastructure, adding, “India has a lot of those things, and connectivity is being built very clearly (through GIFT city). I think it’s super smart or many super smart ideas went into the thinking of GIFT City. It makes total sense, and that’s why the attraction is so high.”

India offers itself as the largest market in the region, with access to other potential untapped markets in South Asia. For India to offer itself as a regional hub it should be able to offer regional and international talent creating a need for a “very mature immigration system,” according to Hahn.

For Narayanan, the main push from the country need to be in the free flow of incoming capital and adequate opportunities to take it out as and when it is required, which according to him is happening at GIFT City.

He explained “I don’t think anybody is setting up a business for charity. It has to be business-oriented, and the decisions have to be based on business needs and what you expect out of the business that you write.

“As a business, you’re not looking just at the domestic market, you’re looking at business from around to come to you. I would say, initially, it would be immediately the domestic market, which would attract and once people are based in India, doing the domestic business, that is when they would start looking out for your nearby areas business also to be done. So, to that extent, I think the domestic market is important from a growth perspective.

“The growth opportunities available here are enormous, in terms of also ‘Insurance for all by 2047’, so the amount of business that will come in, and that can be accessed by the insurance companies and the reinsurers is there.

“Finally, let me be a little blunt, I think the Indian domestic market needs to understand that we need to be viable. It can’t be just about growth, it needs to be about viability. So, pricing and risk management are important. Once we do that, I think the interest levels will definitely be there.”

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