The Indian insurance and reinsurance market is going through a stage of modernisation, with a number of initiatives seeking to better inform consumers, encourage foreign capital into the market and to ready the market for new product developments.
India’s insurance regulator, the Insurance Regulatory and Development Authority (IRDA), is leading these initiatives and one of the possible avenues for exploration, which IRDA would like to see as a product developed and used locally, is the catastrophe bond.
At a recent event held in Kochi, IRDA Member for Finance and Investment Mr. Radhakrishnan Nair explained that the Indian insurance sector is entering a stage of maturation in its development. A number of IRDA and broader government finance initiatives are expected to help to grow the sector and there is an expectation that more foreign capital and foreign players will choose to enter the market in years to come.
Nair explained that the insurance sector has evolved, as has Indian finance, and that the time to look to the next stage of development and expansion is now.
The entry of more capital into the insurance and reinsurance sector, both domestic and foreign capital, will attract more entrants to the market and create more jobs.
In the future Nair said that he would like to see simplification of insurance products, in order to help to educate the Indian consumer understand that insurance is contingent in nature and is not an investment product.
Looking further ahead, Nair said that the agenda for the insurance and reinsurance industry in India would be to leverage technology, capital and innovation in order to make insurance more widely available, coverage more effective and to introduce new products into the market.
New product development and the adoption of products used elsewhere in the world for insurance and reinsurance is a key goal for IRDA. Nair cited catastrophe bonds as an example of a product that the Indian regulator would like to see used domestically in the future.
IRDA is not the only voice calling for catastrophe bonds to be issued or used in India. India’s national reinsurance company, General Insurance Corporation of India or GIC Re, recently told Artemis that a project assessing the feasibility of issuing catastrophe bonds as a component of the reinsurers retrocession is ongoing, but that progress is being made.
With the regulator also clearly aware of catastrophe bonds it is to be hoped that Indian ambitions to see cat bonds issued in the country eventually come to fruition.