Market Report: India - The chosen one.

(From Reinsurance)

General Insurance Corporation (GIC) of India was designated as the Indian reinsurer in November 2000 by an act of parliament which meant it functioned exclusively as a life and non-life reinsurer. This means it acts as the reinsurance facilitator for the Indian insurance companies.

It also acts as the manager of the marine hull pool on behalf of the insurance industry.

It provides reinsurance capacity on a treaty and facultative basis, both domestic and international. However, the reinsurance regulation aims at a maximum retention of insurance premium within the country. This means the GIC is entitled to 20% obligatory cessions on risks underwritten by non-life insurers in India.

The legislation also provides for utilising GIC's capacity before any risk is offered to the international market. This has led to criticism that the GIC is not only losing business and suffering from underutilised capacity but also that the government is losing foreign exchange. The indications are that insurers want to form relationships with reinsurers abroad.

On the domestic front GIC has put a focus on specialist areas such as the agricultural reinsurance market. PB Ramanujam, managing director GIC said: "GIC handled crop insurance on behalf of the government for a reasonable period of time. This has given us the expertise and the feel of the Indian agricultural insurance business, equipping us to manage agricultural crop reinsurance."

It is true that the benefit of this expertise is something that foreign companies will find hard to replicate but this year is expected to be a hard one in the agricultural sector, with drought and floods causing losses in the insurance business.