AM Best maintains its negative outlook on India’s non-life insurance market

Factors that mnay lead to AM Best revising its India non-life outlook to stable fron negative in the future include evidence of sustainable improvement in the underwriting performance supported by better pricing discipine, as well as an improved balance of overall earnings and stabilising of economic  indicators, explained AMBest..      

 

London:

International rating agency AM Best has maintained its negative  outlook on India’s non-life insurance market.

Key factors underpinning the outlook, according to the rating agency, include:

-Competitive market conditions and persistency  poor pricing discipline in core business lines of motor , health and agriculture,

-Unhealthy reliance on unrealised and realised gains from high-risk investment  classes to offset  underwriting losses,

-Economic fallout from Covid-10 pandemic expected to have knock-on implications for insurers over the medium  term,

-Disruption and integration challenges  expected with planned restructuring of several state ownedinsurer.

 

Motor, health and crop lines of business, which collectively account for approximately 80 per cent of total non-life premiums in India,have weighed haevily on the market performance in recent years, with many insurers having suffered substaial underwriting losses from these lines, explained the AM Bestreport.. 

 

Overall, AM Best expected the Indian  non-life market in the face of several headwinds over the medium term.Some of these factors include strong competition, poor pricing disciplineand reliance on investment activities for the profitability , have been prevalent for a number of years.

 

However, more recent market dynamics including  heightened economic uncertainty and Covid-19 implications are expected to weigh further on the non-life insurnace market of India.Although, the segments consists of diverse range of insurance companies , the general operating environmment in India over the short-term is likely to present clear challenges for non-life insurers earnings and capital positions, said the rating agency..

 

Factors that mnay lead to AM Best revising its India non-life outlook to stable fron negative in the future include evidence of sustainable improvement in the underwriting performance supported by better pricing discipine, as well as an improved balance of overall earnings and stabilising of economic  indicators, explained AM Best..      

 

India has achieved a compound  annual growth rate of 16 per cent  in non-life insurance premium.In addition , India ranks as the fifth largest  non-life markets in Asia-Pacific and the 15th largest globally (based on 2018 premium volumes accrding to Swiss Re's sigma report)..

 

Despite its size,the non-life insurnace penetrationrate in India remains close to 1 per cent, far below the global industry  average, highlighting the vast potential for continued growth in the country' non-life insurnace sector, said the report.


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