Mumbai, Jun 20: State run General Insurance Corporation of India (GIC), currently the sole reinsurer in the Indian market and Hannover Re, the fifth largest global reinsurance company have agreed to jointly development life reinsurance business in India.
At a function held here last night a Cooperation Agreement was signed between the two organisations in the presence of Union Minister of State for Finance P K Bansal. GIC Re and Hannover Re will jointly market and provide the life reinsurance service in India. The agreement will be for a minimum period of five years and will involve sharing of new business by both the parties in India. Speaking on the occasion Mr Bansal said the Union government has prepared a draft of Foreign Direct Investment (FDI) to increase fund from 26 per cent to 49 per cent in the insurance sectors. The draft would be shortly passed in Union cabinet meeting, he said.
Following broadening of definition by Insurance Regulatory&Development Authority of India (IRDA) of the infrastructure sector (to be notified) to align it with that of Reserve Bank of India, insurance funds will now flow to special economic zone projects, internet services, broadband networks and others, he said. The move is expected to address the constraint faced by insurance companies such as lack of investment avenues to comply with regulatory requirements. However, globalization and consolidation worldwide among insurance players, and financial service providers in general, has resulted in exploration of avenues for cost improvement, he said.
The Business Process Outsourcing in the sector in India is growing at pace, with revenues of about USD 800 million by 2007. Meanwhile, Speaking to the sources GIC CMD Yogesh Lohia said the synergy would provide the Indian life Insurance industry with a competent global life reinsurance alternative, whilst developing this expertise within the country. This initiative also augurs well for the Indian life insurance industry, which has seen a upward growth curve since the liberalization, with the new business premium figure for 2007-08 at Rs 93,000 crore, an increase of 23 per cent over the previous year. This is a quantum leap from the new business premium of Rs 10,663 crore in the first year after liberalization in 2001-02, he said.
''GIC Re and Hannover Re propose to target significant market share to build a profitable book of business, whilst providing good service to the life insurance industry,'' he added.