GIC Re switches approach to reduce dependence on investments for profits

State controlled GIC Re will have to work with an operational efficiency that gives it a combined ratio of less than 100, in order to make its reinsurance operations sustainable, according to Mr Devesh Srivastava, chairman and managing director of GIC Re.

This is a change in business approach for the reinsurer which was incorporated in November 1972.

“In the next 9-12 months, we will not work on a topline approach, and will only write business that makes sense to us. We cannot afford to dole out money; our investors don’t want that approach,” Mr Srivastava said in an interview with Hindu Business Line.

He said, “In our 49 years, we have written our business in a manner in which our combined was always more than 100. This was because we had a healthy investment income coming our way. But with the IPO in October 2017, our investors are clear that we are not an investment company; we are a reinsurance company, and we may as well make profits in the business we are in. Also, rates on investments are heading south.”

Outlook

Outlining the reinsurer's likely performance in the current financial year ending 31 March 2021, Mr Srivastava said that the general insurance industry has not been doing well. With the auto industry not doing well, motor insurance has shown a huge decline. The economy is in a slowdown “with not too many projects, so fire and property insurance is not going well”.

However, he noted there has been some improvement month-on-month. He said, “By the end of this fiscal year, we should be back on track, though it may not be as good as previous years.”

Source: Asia Insurance Review