Low market penetration – High growth potential

The socio-economic transformation of India presents its insurance industry with great challenges. Forecasts suggest that the country’s insurance market will increase to some €100bn, five times its current volume, over the next ten years. This growth will be driven above all by rising demand from India’s middle class, currently numbering some 300 million people, and the improvement and expansion of the infrastructure.

Freedom of establishment for foreign insurers is limited at present to joint ventures with a maximum foreign capital share of 26%. The government is currently examining the possibility of increasing this share to 49%. At present, 17 property insurance companies and 17 life insurers are licensed to do business.

These figures vividly illustrate how much the insurance industry has already profited in recent years from the opening of India’s market as well as from the country’s high rate of economic growth. Between 2001 and 2006, the annual increase in premiums averaged roughly 24% in life and 11% in non-life. In an international comparison based on total population, market penetration is still comparatively low in what is the second most heavily populated country in the world. With an average premium volume as a percentage of GDP, market penetration is about 0.6% (non-life) and 4% (life). In the non-life sector, it is estimated that 90% of the Indian population have no insurance protection whatsoever. In terms of absolute premium volume, however, the country already ranks fi fth in Asia after Japan, South Korea, China, and Taiwan and fifteenth in the world (2006). And experts agree that the speed of expansion will continue to be high in the years to come.

Positioning ourselves selectively as a reinsurer

Munich Re has 50 years of experience on the Indian insurance market; it knows the market players and local customs and practice. We opened an office in Kolkata in 2000 and a representative office in Mumbai the following year. We enjoy the confidence of the Indian insurance market and, on the strength of our long-standing business relations, are recognised as a reliable reinsurance partner.

In the current market phase, we are looking beyond our traditional reinsurance business, positioning ourselves as a global reinsurer particularly in niche markets and in sectors where quite specific, individual solutions are required. For example, we are stepping up our involvement in renewable energy projects. With a view to offering attractive insurance solutions in rapidly growing emerging markets, we developed a new product last year: the Kyoto Multi Risk Policy.

We also make available our risk knowledge and financial strength in connection with large and very large risks – a segment that is continuously gaining in importance in the dynamically growing economy of India. We not only provide our capacity but also make an important contribution to the development of risk awareness.

We intend to do everything in our power to support India in the reinsurance sector. To ensure the stability of its strongly expanding insurance market, deregulation must be extended from India’s primary insurance market to include international reinsurance business as well. We intend to open a reinsurance branch as soon as the legal framework permits.

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