No barriers to growth

Alice Vaidyan is used to achieving firsts in her life. She has already succeeded in managing a work-life balance that has allowed her career to prosper to the extent she became the first female managing director of any Indian insurer or reinsurer in life or non-life earlier this year.

Now, in her role as chairman-cum-managing director of the Indian state-owned reinsurer General Insurance Corporation of India (GIC Re), she has new targets in her sights.

She has been appointed into the role after a 32-year career in other government-owned entities, including GIC Re for the past eight years where she served as the general manager and chief financial officer. She will hold office until July 2019.

Vaidyan stresses that while the government appoints the managing director, GIC Re remains free from government interference and she has complete freedom to run the company. And her aims are ambitious.

She wants the business, which is currently the 14th largest reinsurer in the world with $2.7 billion in gross written premiums in the 12 months to March 2016 (growth of 21 percent compared with a year earlier), to be a top 10 player within the next three years. It’s an achievable feat but not an easy one, given the consolidation happening in the industry and the flight to quality by buyers that is creating a more top-heavy reinsurance industry globally.

“Our goal now is to become one of the top 10 players within three to four years. I know that is ambitious but we are looking at both organic growth and acquisitions and we feel this is achievable,” she says.

Growth, Vaidyan says, will come from two sources: the company’s domestic market in India which represents 55 percent of its business and where, while it enjoys a significant market share, things are also becoming more competitive, and through international expansion, which represents the other 45 percent of the portfolio.

Domestic bliss

In India, she says, the company is enjoying growth of between 10 percent and 20 percent. This is largely due to a huge spend by the Indian government on infrastructure projects and the creation of 100 new ‘smart’ cities and 15 million affordable new homes.

“On top of this, there are huge renewable energy projects underway and the agriculture sector, the third biggest in the world after China and the US, is also developing rapidly,” she says. “The governments has a lot of projects in the pipeline.”

In the domestic market GIC Re also leads all the mega-risk policies including the largest refineries and offshore projects and also several other public sector and private sector majors.

On top of this, as the country’s 1.3 billion population develops and becomes wealthier, there are great opportunities in a burgeoning personal lines market. Penetration levels in India are less than 1 percent for non-life, and less than 4 percent including life, so the insurance gap is substantial and represents an opportunity for more growth for GIC Re, Vaidyan says.

That said, GIC Re will no longer have things all its own way. The market is opening up with Hannover Re, Munich Re, Swiss Re and SCOR having all secured licences in the first round of allocations.

Vaidyan is not perturbed by this, however, believing that given the solid growth in the market—usually in the 10 to 15 percent range—there will be room for everyone to grow. She also believes their presence will bring pricing discipline to the market, which will also benefit everyone. On top of this, GIC Re will also write 5 percent of any business, growing its premium base in the process.

The problem in India is less growth and more ensuring sustained profitability, Vaidyan says. She admits that the domestic part of the reinsurer’s portfolio has sometimes been loss-making in the past and, with the investment side of the business struggling too, this has presented a challenge for the company.

GIC Re, as the state reinsurer, writes some business including third party motor insurance, for example, at rates that it does not control. As litigation and other costs have spiralled in recent years, the portfolio has become more and more unprofitable.

“We have to write that business as there is an element of social objective to our doing that,” Vaidyan says. “But we have to ensure it is profitable so we have been working with the government on that. Internally, we want to be aiming for a combined ratio of below 100 percent.”

International expansion

This is only half the picture for GIC Re. The company already has offices in London, Dubai, Kuala Lumpur and Moscow and it has previously revealed plans to invest in a base in Brazil. But Vaidyan’s ambitions go further. In the next couple of years, she says, she is also looking to launch in the US and convert the firm’s representative office in Moscow into a full branch office.

Commenting on where she sees the greatest potential at the moment, she says the Middle East, managed out of the office in Dubai, while the London operations, although small, are growing, as is the business in Malaysia.

GIC Re is also willing to grow via acquisition where appropriate. In April 2014 it acquired South African reinsurer Saxum Re for $2.3 million—the company’s first overseas transaction. GIC Re said the deal will increase its diversity and give it a foothold in what it regards as a market with high growth potential. The fact that Johannesburg-based Saxum Re boasted both life and non-life licences also helped seal the deal as GIC Re eyed future growth in the market.

It has a healthy appetite for more deals but has sometimes lost out. In early 2014, it missed out on acquiring Antares in a bidding war in which the deal eventually went to Qatar Insurance Company. The key thing about that missed opportunity is that it would have given GIC Re a Bermudian platform, with a Class 3 reinsurance licence and a presence in Lloyd’s through Syndicate 1274, something that remains on Vaidyan’s wish list.

“We are open to acquisitions but they have to be the right fit,” she says. “Lloyd’s is definitely a long-term ambition and we will look to buy a syndicate at some point, but we are in no rush and it will have to be the right target at the right price.”

Growth is also achievable through diversification of business lines, she says. While property-casualty represents the core of its portfolio it has started diversifying into other areas including healthcare, terrorism and cyber.
The company has also started writing small amounts of life business and Vaidyan wants to grow this portfolio in India and overseas.

This strategy of diversification, while generating growth and potentially moving the company towards that coveted top 10 spot, ties in with a wider philosophy around the way the reinsurance landscape is changing and the relationships buyers want to have.

“There is an element of tiering occurring the market and we are finding that buyers want deeper and more substantial relationships, with bigger players able to offer to a full range of services,” she says. “Being bigger is advantageous and you have the potential to see more deals and participate in a more meaningful way on programmes,” she says.

“Reinsurance buyers have been changing their strategies. They want a smaller number of deeper relationships, which suits us. We believe in long-term relationships through both the good times and the bad times; we certainly don’t work on the basis of knee-jerk reactions. We are a very stable and traditional company and that is appreciated by buyers.”

She adds that this is especially the case in Asia where long-term relationships are very important and she foresees solid growth as a result.

The one area the company is cooler on—compared with many comparable players globally—is the alternative risk transfer space. While it has secured approval to launch a cat bond and has even toyed with the idea of doing a deal that would cover a nuclear insurance pool, Vaidyan says rates in India are too low to justify its use and it is more focused on traditional growth for now.

“There are other ways in which the reinsurance industry can find growth and help the world deal with natural disasters better,” she says. “We should be helping deal with the potential impact of issues such as climate change especially in parts of the world where they suffer the most.

“We can help bridge the gap in terms of post-event financing; we have the knowledge and money to help but traditional reinsurance tools can serve their purpose in these instances.”

Balancing social purpose with her ambitious plans for growth, Vaidyan acknowledges that the road ahead may not be easy. But she is confident in her own ability and that of the people in the organisation.

“We have some great talent here and I am confident in what we can achieve,” she says. “Taking over the reins in a challenging reinsurance market globally and the entry of foreign reinsurers domestically has made my journey even more exciting and fascinating. It is a challenge as the industry is in constant flux but GIC Re will evolve.”

No discrimination, but life choices differ
While Alice Vaidyan’s appointment is a clear first for a woman in India, she was unsurprised by her appointment. She believes there is little gender discrimination in India but admits that women are held back in other ways—often by the life choices they make.

“In India there is no gender discrimination at all in business. We have total freedom in the choices women make. The real question is: what are most women’s aspirations? Are they the same as men’s? Women often have different aspirations and that is an internal mental barrier,” Vaidyan says.

Her husband works in banking and they have three children. She admits it has sometimes been a struggle juggling her career with her home life but believes anything is possible with support in place.

“I feel it is possible to have a good work-life balance with the right support systems and good planning,” she says. “It is not easy but now I have attained this position I want to use it to mentor more women to become business leaders. I want to use my voice to show women it is possible to do both. I feel a responsibility to do that now.

“The Indian insurance sector has not had a female CEO, so it was time. We need women in leadership roles, and at the top of the sector they are in. For women leaders like me, our job will be to mentor young women to come into leadership. I hope I serve as a role model for many Indian women to have confidence in their own abilities.”

Reporting solid growth
GIC Re achieved a record growth of 21.41 percent in its last set of annual results, for the 12 months to March 31, 2016.

During the year the company wrote gross global premiums of $2.77 billion, a 21.41 percent increase over the previous year. The premium split between the domestic and the overseas business during 2015–16 was 55 percent and 45 percent, respectively.

The company’s profit before tax during the year 2015–16 was $445 million. Profit after tax was $429 million. The company proposed a dividend of 200 percent of share capital, amounting to $129 million, for the year 2015–16.

The company said its agriculture reinsurance business performed remarkably well while during 2015–16 GIC Re help kick-start the India nuclear insurance pool for the Indian nuclear power industry.