Intro: T.L. Arunachalam, director, Global Strategy and Special Projects, Bharat Re-Insurance Brokers, is excited to tap new opportunities in domestic as well as international markets:
Mehul Dani: Whatare the growth indicators of your company in 2014-15?
T. L. Arunachalam:During 2014-15, we have been able to add some very visible and reputed corporates as our clients. We have extended our presence in reinsurance business to some new insurers in the Indian market and also some newer markets internationally. Due to confidentiality norms with our reinsurers, we are not allowed to disclose the names of our clients, insurers and reinsurers. We have seen a 12% growth in the premium placed and about 15% increase in the revenue for the company. The Indian insurance market is quite soft in terms of premium pricing of property insurance as well as engineering and project insurance, which used to be under a tariff regime till 2008-09. We have seen instances of premium amounts remain same as per expiring policy even in cases where the sums insured had increased substantially.
What is the correlation between insurance companies and Bharat Re?
The respective role of insurers and insurance brokers is clearly laid out as that of a risk carrier who will indemnify the insured party for any loss covered under the policy and the insurance and risk management advisor. Bharat Re plays a complementary role and acts as a facilitator for insurance to ensure the transactions are smooth and without any hitch. We make sure the risk information is presented to the insurer in a transparent manner and the insurer is able to underwrite the risk under the right risk category and the policy conditions are finalized accordingly. Our role provides a better platform of clarity and certainty to the insurance transactions for them to result in a win-win for all parties.
What is your spread in India?
Bharat Re is one of the largest insurance brokers in the corporate practice with 17 branches and a few more service centers across India. We have 2 divisions – direct broking and reinsurance broking. Under the former, we deal with corporate clients and under the latter our clients are insurance companies themselves where we help placement of their risk with reinsurers across the world. Just as we have a pan India presence to serve our corporate clients in India, we work in a widespread geography to work with insurers – including SAARC countries, Middle East and East Africa.
What actually constitute ‘acts of sabotage’ with regard to terrorism insurance cover?
An act of sabotage means subversive act(s) committed for political, religious or ideological purposes, including the intention to influence any government and/or to put the public in fear. The element of subversion or being covert differentiates sabotage from terrorism for which there would be an overt, violent act. The Indian insurance market operates terrorism insurance through a dedicated terrorism insurance pool. As per regulations, any client can obtain rates from international insurance markets provided the sum insured for material damage and business interruption in any one location exceeds Rs1500 crore. The international markets provide flexible policy wordings and competitive terms on Indian terrorism insurance placements.
What is the annual terrorism insurance premium of related policies in India?
The Indian terrorism pool’s premium income for 2012-13 is Rs 482.53 crore, which dropped to Rs 471.12 crore in 2013-14. The figure for 2014-15 is yet o be published.
What is the premium for terrorism policies that is insured abroad?
It is difficult to estimate because the business is placed with not one, but many reinsurers abroad and it is spread globally by participation of many reinsurers covering every large risk, by taking a small percentage of share in the risk and also proportionate share in the premium.
Are the government policies and regulatory measures conducive for the growth of the reinsurance sector?
We think the Indian market is progressing quite well to take shape as a mature insurance market and also a favored destination for international insurance players. With the increase in FDI in the insurance sector and also development of tax free facilities like GIFT City in Gandhi Nagar, Gujarat, the country is inviting capital inflow and also bringing cutting edge insurance underwriting and claims solutions into the insurance market. There must be a healthy debate on availability of credit for insurance transactions also and necessary legal amendments to be in place for the same.
Which elements contributed to the profitability challenge in 2014-15? What is the strategy to deal with the issue during 2015-16?
Our profitability hinges on the growth of revenue and due to soft premium rates in the property, engineering and project insurance, there could be a plateauing of revenue growth. Even if there is growth in values insured, we see a flat trend on premium volume. In 2014-15 we were able to offset this by adding new customers across branches and also through (i) discussion on new insurance solutions for the clients arising out of their new production facilities, new product line, (ii) emerging risks such as cloud computing, cyber liability and also (iii) considering risk improvement through business interruption covers, etc.
Our strategy for 2015-16 would continue to be acquiring new clients, working on newer products and also diligent approach to expanding risk profile of our existing corporate clients. In the reinsurance division, we will reach new markets such as South East Asia, West Africa and more countries in the Persian Gulf and MENA markets.
What are the opportunities and challenges for the Indian reinsurance sector as well as broking firms in the years to come?
The Indian market is still characterized by many corporates still opting to work directly with insurers without exercising the choice of using a top of the line insurance broker like Bharat Re. The challenge will continue until the time market is unable to discern the utility of and expectations on the insurance broker. The medium term market growth will also see specialist brokers just as specialist insurance companies would enter the market.
How do you thing Indian reinsurance brokers are positioned compared with their counterparts in US, UK and China?
In US, UK, etc, insurance companies always prefer to deal with corporate customers through insurance brokers only. Also the customers always work through a broker and leave it to the insurance broker to decide as to which insurer they wish to place the risk with. We also see a possibility of concepts of wholesale and retail brokers taking shape where wholesale broker would create facilities and innovated products to reach the markets with the help of retail brokers. Such concepts may find place in the Indian market when the market is more mature.
What are your expansion plans and targets for 2015-16?
We plan to achieve a healthy 15% growth in top line premium placement in the year 2015-16 and target a revenue growth of about 20%, aided by the new efforts in the reinsurance business. In the coming year, we will be more active on the facultative insurance placements in products such as liability insurance products, standalone terrorism insurance, crime insurance, IT and cyber risk and also professional indemnity covers for financial institutions such a PE funds, advisory firms.
Our global strategy is to identify new markets for reinsurance business such as China, Indonesia, Vietnam, South and West Africa, etc, and also build long term relationships with reinsurers, reinsurance brokers and insurance companies across the globe. In the next 3 years we wish to achieve the status of an Indian insurance broker of international stature with a high degree of professional excellence, respectability among corporate customers, insurers and other fellow intermediaries.
