India’s GIC Re still investigating catastrophe bonds

by Artemis on April 3, 2014

India’s national reinsurance company, General Insurance Corporation of India or GIC Re, is continuing to look at catastrophe bonds as a viable addition to its retrocessional reinsurance program, according to its chairman.

As Artemis reported back in October, GIC Re would like to be the first Indian sponsor of a catastrophe bond, a move it sees as a way to cover its losses while accessing capital at cheaper rates. The focus of its investigations into cat bonds was said to be on finding capital markets protection for natural disaster risks such as earthquake, flood or tsunami.

In October Chairman of GIC Re, AK Roy, commented that the move to investigate cat bonds had been approved; “We have got board approval to raise funds through Cat bonds. Now, we are in the process of hiring a consultant. Our outgo will be less if we pay bondholders.”

Now, in an article from the Indian Express, published earlier today, AK Roy has reiterated GIC Re’s desire to be the first cat bond sponsor in India. The reinsurer has expansive ambitions as well as a desire to tap the capital markets it would seem, with Roy also saying that it would like to start-up operations at Lloyd’s of London.

AK Roy said; “We are looking for the right company with the right price in London. We are also examining to raise funds from international market in the form of catastrophic bond.”

Roy also confirmed steep rate declines in the April reinsurance renewals in India, saying that reinsurance cover has become 20% cheaper for 2014-15. This may go some way to explaining the reinsurers desire to expand internationally and Roy said that the company would need to work harder to maintain its portfolio.

Issuing the first Indian catastrophe bond will not be an easy task. The risk models for Indian perils are not as mature as in typical cat bond peril regions and there may also be some concern about the use of indemnity triggers in such a large country which is still developing.

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