Non-life market faces pricing and investment challenges

Competition, poor pricing discipline and investments are challenges faced by the India non-life market, says AM Best which has a market segment outlook of negative on India's non-life market,

In an episode of AMBestTV, Myles Gould, director, analytics at AM Best, said, “Key factors underpinning the negative outlook include the competitive market conditions in core lines of business along with poor pricing discipline.”

“Furthermore, there is an unhealthy reliance on unrealised and realised gains from investment holdings, particularly emanating from typically high-risk investment strategies. In addition, a more recent dynamic is that of the global COVID-19 pandemic, which is expected to result in a level of volatility in top-line and bottom-line results of Indian non-life insurance.”

Yuan Tian, senior financial analyst at AM Best, said that the market has been loss-making on the writing side.

“So the insurance companies in this market have been relying on investment returns to generate overall positive operating earnings. The companies have been quite aggressive investing in high-risk asset classes such as equity, low-quality fixed income and real estate assets.

“Those asset classes have been generating quite good returns over the last years. However, during the pandemic, the stock market has fallen by over 20% in the first quarter. This has impacted the capital position and earnings of non-life insurers.”

Source: Asia Insurance Review