COVID-19 further stresses India's financial system, puts greater pressure on (re)insurance

In January, a report by Moody's Investment Service (Moody's) said that India's slowing economy will weigh on insurance premium growth over the next two to three years despite supportive measures put in place by the Insurance Regulatory and Development Authority of India (IRDAI).

Now the Financial Times (FT) is reporting that the COVID-19 outbreak will put even more pressure on the country’s economy as foreign investors fleeing the country’s stock market has seen the Indian rupee reach an all-time low against the dollar.

The currency on Friday weakened past INR74.5 to the dollar as growing fears over the pandemic sent shockwaves through equity and foreign exchange markets, said FT. India’s economy has been facing a slowdown for some time now and overseas investors have pulled about $4bn out of Indian markets since late February.

The Moody’s report in January said that health premiums in particular are likely to increase as a result of the Ayushman Bharat, or National Health Protection Mission, a government-funded initiative that aims to provide 100m families with up to INR500,000 ($6,762) of health insurance coverage each year.

“India’s GDP growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth,” said Moody’s senior vice president Benjamin Serra.

However, he also pointed out how the country’s low insurance penetration rate offers ample room for further growth while supportive government and regulatory initiatives could also help mitigate the currently challenging environment for Indian insurance and reinsurance companies.

Source: Asia Insurance Review

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