Ratings agency A.M. Best has maintained its positive ratings for the General Insurance Corporation of India (GIC Re), amid the latter’s “favourable” business profile and “appropriate” enterprise risk management.
The insurer saw its financial strength rating affirmed at A- or excellent, and its long-term issuer credit rating at a-. A.M. Best said the outlook for these ratings is stable.
State-owned GIC began life over 40 years ago and is one of the country’s largest insurance firms. It is one of five other government-owned insurance companies that have been given the go-ahead to list on the country’s stock exchange. The move is expected to reduce the government’s stake in each firm from 100% to 75%.
A.M. Best said GIC Re’s capital and surplus is sizable, standing at INR 485 billion (US$ 7.5 billion) at the end of March last year. It added that the company is India’s main reinsurer and holds a significant share of the reinsurance market.
“It continues to have close relationships with direct insurers in India, and regulations give it an advantage in obtaining reinsurance placements,” it said. “In addition, GIC Re maintains a geographically diversified underwriting portfolio with access to a sizable amount of business outside of India.”
Nevertheless, A.M. Best warned that an offsetting factor is the potential strain on GIC Re’s risk-adjusted capitalisation due to increasing underwriting leverage, partly attributable to rapid growth in crop premiums.
“Additionally, because equities form a considerable proportion of the company’s investment portfolio, its capital and surplus could be volatile in times of stock market turbulence,” it outlined.
India’s finance ministry recently announced it will work with GIC Re and other state-owned insurers to bolster their solvency ratios in order to get the regulator’s nod for listing on the stock market. The Insurance Regulatory and Development Authority of India (IRDAI) requires a solvency ratio of over 1.5 before granting approval for listing on the stock exchanges and selling shares.
