In order to maintain solvency level of 1.65 times (regulatory requirement of 1.5 times), the general insurance sector needs approx Rs. 37,000 crores of capital in next 5 years. “Owing to the sizeable difference in growth rates, the share of the private players in the overall market (excluding specialised insurance and stand alone health insurance players) improved to 44 per cent in FY2017 from 41 per cent in FY2016. Even if we were to adjust for crop insurance, the market grew at a robust pace of 14.4 per cent during FY2017,” rating firm ICRA said.
“With low investment earnings, and higher claims, the profitability indicators of PSU players have been more deeply impacted than that for select private players. In our estimates, for the 9-month period of FY2017, return on equity for PSU players subsided by more than 6 percentage points while that for select private players increased by 3 percentage points,” it said.
During FY2017, crop insurance was the fastest growing segment for the entire industry. This segment grew by 6.5 times and had a 12 % market share in FY17 vis-a-vis 2 per cent in FY16.
Karthik Srinivasan, senior VP and group head financial sector ratings, ICRA Ltd said: “we expect the growth rates to remain strong at around 20 per cent in FY2018 driven by crop, motor and health businesses. The government’s initiatives aimed at improving the penetration and density levels coupled with the industry’s ability to leverage technology and reach is likely to facilitate higher business volumes over the medium to long term.”
“The sizeable unrealised capital gains from the past investments for the public sector insurers (in excess of Rs 40,000 crores under Fair Value Change of Account) provide adequate buffer to support future growth. The equity requirement for the industry will be significantly lower in case the companies are able to mobilise Tier II bonds of around Rs 23,500 crores as permitted by the regulations, subject to market conditions and investor appetite,” ICRA said.
