In a recent panel discussing how reinsurance strategies can expand insurance access in India, Mahipal Reddy, Executive Director, International Financial Services Centres Authority (IFSCA), GIFT City, Gujarat, suggested that the analytical framework already set in place for catastrophe bonds and insurance-linked securities (ILS) will drive the popularity of parametric solutions.
According to Satyajit Tripathy, Member Distribution, Insurance Regulatory and Development Authority of India, accessibility, awareness and affordability are the three As that will help close the country’s prevalent protection gap.
Tripathy said, “Spread awareness, create policies, and even help the government in various schemes which can be implemented and which will be affordable, accessible to the people at each level.
“We have to start from the bottom of the pyramid and move upwards. If we are to become a $5 trillion economy very shortly, we must break the idea of insurance and have a product available, as desired by the people at each level, which is the thing which is being planned and is rolled out in phases by the regulator.”
India’s mission, “Insurance for All 2047,” sets the stage for an ambitious goal to provide adequate coverage to every individual, business, bank, property, and allied assets. Reddy explained, “This Insurance for All 2047 requires a lot of capacity and support. When it comes to the reinsurance capacity, I think IFSCA, emerging as a regional hub, will provide the required capacity. The reinsurance segment at the IFSCA is a major one. So far, the premium that is placed cumulatively up to 2024/25 is $611 billion, and according to data, 93% placed is reinsurance. It is very wise to support the reinsurance growth capacity to the domestic influence, as it will provide reinsurance and retrocession support.”
Reddy stated that the number of reinsurers at IFSCA today is more than the other insurers combined, reiterating that GIFT City is emerging as a re/ insurance hub to support the solutions the Indian domestic insurers want.
Readers may recall that there have been recent calls for India to develop its own regulatory framework for insurance-linked securities (ILS), including catastrophe bonds.
In August, the panel, the Working Group (WG), which consists of industry experts, particularly within Alternative Risk Transfer (ART) arrangements, published a report that outlined how the IFSCA can play a crucial role towards making India a hub for cat bonds.
Reddy said, “Traditional reinsurance is not going to support alone, it has to be complemented with unconventional reinsurance.
“So, in this context, IFSCA has come out with the analytical framework for ILS and cat bonds, so this will support parametric insurance, which is going to be a major key solution for achieving insurance for all, because it cannot be one-to-one, and distribution also cannot be one-to-one, it has to be on a mass scale.
“Parametric insurance solutions will be provided through the GIFT City, and some of the reinsurers who are already conducting this activity in their domestic areas, the line of activity that is permitted by their domestic regulator is also permitted here, without waiting for a separate framework to emerge.”
Adding, “So, once this becomes a full product, I am sure that Insurance for All can be achieved at a rapid pace.”
Tripathy added, “I would say that the journey towards 2047 has actually begun, and it’s truly underway. We have actually put it in various kind of phases. For a country as diverse, as large, and populous as India, there is no solution which will fit all areas.”
