Excerpts of Interview with Mr Satyajit Tripathy, General Manager, GIC Re with Dr Rakesh Agarwal, Editor The Insurance Times
About Mr Tripathy
Satyajit Tripathy, is the General Manager and manages Agriculture, Liability, Misc., Motor, Credit Re, HR & Training, Investment Accounts and Investors Relations at GIC of INDIA.
He holds a bachelor’s degree in Science (Agriculture) from Orissa University of Agriculture and Technology, a post-graduate diploma in Management from Xavier Institute of Management, Bhubaneswar and has completed the Licentiate examination of the Insurance Institute of India. He has been associated with GIC of INDIA since March 1, 1988. Previously, he has worked as Assistant Manager in AICL, Delhi, Chief Manager in Investment Department, Assistant General Manager in Investment (Operations) Department and Deputy General Manager in Agriculture Reinsurance, Investment Mid- Back office of GIC. Before joining Crop Insurance Dep’t. of GIC he was Chief Investment Officer of GIC from 2015-18.
Q. Your views on the impact of Covid-19 on the re-insurance industry?
A. The pandemic impact is going to be very long-lasting in the re-insurance industry. We have seen how the insurance industry i.e., the Non-Life Industry has responded to the pandemic with the emerging kind of issues regarding the product, pricing, and technology. These are the three issues that will again be flowing back to the re-insurance industry also. This kind of situation, though envisaged earlier came very fast to the industry as a whole, and the industry has also responded quickly. In the Indian scenario also, we have seen the requirement of a lot of other products on the liability side, on the business interruption side, and how to monitor the various emerging situations in different lines of businesses. Even if you can take an example of aviation, the grounding of airplanes, the response to the arrangement of premiums, and settlement of all those accounts are situations that were not envisaged earlier, but the industry responded quite well. I am very sure that going ahead also whenever we face such situations again, the industry will respond to it quite quickly.
Q. Do you visualise the need for the pandemic pool?
A. I think for a country like India, the pool works very well and we have seen the pools that are already operating in the Indian market, the terrorism pool, and the nuclear pool is operating very nicely for the country as a whole. Basically, pools work well when you have loss expectations with high severity and less frequency. Pandemic usually happens very less frequently. And I think a pool arrangement with a huge corpus as proposed by the regulator, will be a good step going ahead and it is the requirement of the time.
Q. Please give a brief about the pools being managed by GIC Re.
A. Yes we are operating two pools, the Indian market terrorism pool, and Nuclear Pool. The terrorism pool actually started in 2002. In the last 18 years, there has been only one claim of 26/11 Mumbai attack in which 376 three crores were paid. Basically, the pools operate based on a contribution by all the participants and a corpus built over many years.
The nuclear pool, which started in 2015, hasn’t seen any claim till date, and it is imperative to mention that the pools actually generate the corpus as soon as possible and as large as possible, and both the pools have got now sizeable corpus and are managed effectively by GIC Re.
The pool accounts, there reconciliations are absolutely in line with whatever is being done worldwide. And whatever situations arise, the pool would rise to the occasion.
Q. Recently, IRDA has identified, GIC-RE as one of the three systemically important insurers. So does this increase your responsibility and how do you look at it?
It certainly does. I mean, whenever the countries have identified the systemically important institutions in the economy and the capital markets as a whole, their responsibility increases manifold. You have to see because your identification comes to the fact that in case anything going wrong, there is going to be a cascading effect in that sector and the industries associated with you.
Also, your responsibility increases thereby. And you also have to be much more fleet-footed as far as compliance is concerned. And we are also a listed entity. So all these things together, we have to be very, very careful and have to keep our eyes and ears open as far as compliance and regulation are concerned. And GIC Re will definitely meet all the obligations that are required or have been identified as a systemically important institution.
Q. As per Global Data report India’s reinsurance market will reach US$7.8bn by 2024. What is your take?
I believe that this assessment which has been done, taking into account the various kind of situations that are emerging, I believe we are almost close to what the prediction is there for the Indian insurance market, half a billion here and there we should be close to that by 2024. The general insurance industry itself is growing rapidly and in another five years, we should be reaching that size as far as the re- insurance marketplace is concerned.
Q. Do you think climate change will pose a bigger risk and challenge than the pandemic that we have faced?
A. We are closely monitoring and observing the situation. I will give you an example, when the Prime Minister Fasal Bima Yojana, Agricultural Insurance, was launched in the country in 2016, in the first year the overall premium was something like 17000 to 18000 crore in the Indian market, which has now reached around 30000 crores in 2020. We are witnessing frequent weather patterns that are affecting crop/ agriculture as a whole.
If you take data on the decadal basis for the last hundred years for India, you will find that post-1980 onwards in the last 40 years, the incidence of drought has actually increased a lot. Earlier you used to have one or two droughts per decade, now it has gone up four to five droughts per decade. In the ten years, we have seen at least three to four droughts. So these patterns are definitely a derivative of what is happening as the weather situations.
So, yes, catastrophes are increasing their impact on overall processes, on agriculture, on various other industries. The industry situated on the coastal lines are also increasing manifold. And I believe that the impact on insurance and reinsurance will be more in the coming years. The companies are also prepared for it.
Q. Do you think data plays an important role in the Insurance Industry?
A. I think the data will also play a big role in this, the better data you get, and better would be the process. Availability of data is not an issue though, in the Indian context, the quality of data remains a concern, but things have improved a lot. But the second issue here is how do we utilize this data? How do you utilize the models that are available to you? Whether the models are actually proving whatever your conclusions are, but yes, various types of data are being used by the industry, various pieces of the inputs that are going into models that are also increasing day by day.
And I think going forward, the research and development in this field also need to be expedited. Because the more you do the research, you get better data, a better scenario of what is there.
Q. With this sandbox approach unveiled by the regulator and more OTC products being launched, how does reinsurer cope with this segment as we have very minimal experience in this in this type of product, and how does the reinsurance market cope with it?
A. It’s a very welcome move, actually, if you allow this, there is a lot of flexibility by the companies, to try out their products and see further how it is responding to the market demand and market requirements. I think reinsurance will not be failing in its duty to respond to this and whenever these products are finally accepted by the regulator and being launched by the companies. After the initial experiment, the re-insurance will always be available. The Indian market is never short of any kind of capacity as such, for new products.
Q. During this pandemic, a lot of businesses felt the need for business interruption risk due to pandemic as normally it is not covered. Is the market or industry thinking of some sort of cover, which would include the business interruption risk?
A. Currently, the product which is available actually is driven by the fact that if there is any kind of material damage to the factory or set up, then the insurance comes into the picture. Since in the pandemic that particular condition is not fulfilled, this benefit is not offered.
But, yes, companies are developing a new product to look into the business interruption side with the pandemic in place and a suitable product as required by the Indian market for the various types and level of industries, whether it is a small or an MSME or it’s a large industry, the suitable product is not very far away and will be available to the market and reinsurers depending on the requirement, they will be playing a crucial role in taking this.
Q. What is your expectation about the insurance industry in India going forward?
A. I think we are on the cusp of a very large growth going ahead. I mean, the support that is given by the industry bodies, government, during various times is a little overwhelming for the non-life industry. The industry is making rapid strides. In the last three-four years, agriculture has also become one of the major lines of business. And the turnover of the overall markets would be touching like one lakh seventy to one lakh eighty thousand crores. I believe that we are poised for a decade of rapid growth from 2020 onwards and all the companies insurers, the reinsurers, foreign reinsurers who are also inside India are actually ready for this kind of a challenge that it will be throwing up for the industry and will be making all the necessary changes that are required to meet these challenges and to provide the worthwhile service to the nation.
Q. What are the GIC-RE’ international expansion plans?
A. We are now almost operating out of 160 countries. We have recently opened our subsidiary in Moscow, the Lloyd’s syndicate which started two years back in London is doing excellently well. We have offices in Dubai and Malaysia and we have a license for Latin America in Brazil. But we think probably this is the time when we will be consolidating our presence in various reinsurance hubs and insurance across the world. The foreign business is doing reasonably well for us.
At one point of time, the foreign business was contributing around 45% of our business and it has come down to 30% because of the significant growth in the domestic agriculture portfolio. We are looking forward to taking it around 35 to 40% in the intermediate-term. And we plan that we shall consolidate our business overseas and we shall be able to reach our clients across the globe from these offices, subsidiaries and the branches.
Q. GIC-Re Posted a net profit in the September quarter, and in the corresponding period, there was a loss in the last year. So how did you manage this profitability despite the reduction in the direct insurance business in this quarter?
A. Actually, we have taken several steps to streamline our underwriting processes. And also we are looking into the areas that are not making sense for us in the business we are concentrating on those businesses which are giving us good results based on the past experience.
A number of steps have been taken by us on the major lines that we write, that is agriculture, property, motor, and health. And these lines have started to turn around. We expect that this focus on the underwriting of profit and the bottom line approach overall for the company as a whole will continue. And will we be seeing increasingly better results of GIC Re in the days ahead.
