India's strong economy means robust growth for insurance

India's strong economy and evolving regulatory regime continue to support growth for its insurance and reinsurance sectors, according to a new report by Moody's Investors Service.

The report, "Insurance - India: Continued regulatory evolution is credit positive for India's insurance sector" showed that robust GDP expansion, coupled with current low insurance penetration, should support double digit growth for the non-life sector over the next 3-4 years.

During fiscal 2018, total gross premiums for the non-life and life insurance sectors grew 11.5% to INR6.1 trillion ($94.0 billion), bringing the 5-year compound annual growth rate (CAGR) to 11 percent.

"The Insurance Regulatory and Development Authority of India (IRDAI) is proactively introducing regulations that will support insurers' balance sheets and improve their access to capital, a credit positive," said Mohammed Londe, a Moody's Assistant Vice President and Analyst.

Liberalization of the reinsurance sector - with the admission of foreign reinsurers since 2017 and IRDAI's steps to ensure that they can compete with incumbents - will specifically benefit the non-life sector.

Regulatory reforms will also improve the sector's capital strength, says Moody's. In 2015, IRDAI raised the ceiling on foreign ownership of Indian insurers to 49 percent from 26 percent, encouraging global players to buy holdings in local entities.

Finally, the government's launch of a new program in 2018 to provide health insurance for 100 million families is credit positive as it will help grow health premiums and provide insurers with cross-sellingopportunities. Most Indian states have chosen to run the scheme as a trust model, which will limit the full growth potential for insurers.

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