Competition in India’s Rs 98,000-crore domestic reinsurance market will intensify with the proposed domestic reinsurance JV between Jio Financial and Allianz. The arrival of a formidable entrant could put pressure on the market share enjoyed by the state-run General Insurance Corporation of India (GIC Re), industry experts said.
Last week, Jio Financial Services, a unit of Reliance Industries, and Allianz Group, through its wholly owned subsidiary Allianz Europe, entered into a binding agreement to form a 50:50 reinsurance JV focused on India’s high-growth insurance market.
The move comes at a time when GIC Re’s dominance is somewhat under strain. Its share in the domestic reinsurance market has fallen from 74.2% in 2019 to 51% in 2023, as per GlobalData. During the same period, the combined market share of foreign reinsurers doubled to 49%.
GIC Share Slips
“The entry of Allianz is expected to increase the competitiveness of the Indian reinsurance market. This will impact the market share of GIC Re and other foreign reinsurers operating in India,” said Swarup Kumar Sahoo, Senior Insurance Analyst at GlobalData, an information services company.
Sahoo noted that the reduction in obligatory cession rates, losses from agriculture reinsurance, and the decline in non-obligatory business have contributed to GIC Re’s shrinking market share.
Obligatory Cession
At present, non-life insurers are required to cede 4% of their premiums — across segments such as motor, health, fire, and marine — to GIC Re. This mandatory portion, known as obligatory cession, is a long-standing arrangement that has drawn criticism from insurers who argue it limits their flexibility and earnings potential. Despite calls for a reduction or removal, the Insurance Regulatory and Development Authority of India (Irdai) has retained the 4% cession for FY26, marking the third straight year without a revision.
“The impact on GIC Re’s obligatory cession needs to be seen with the entry of private players like the Jio-Allianz JV and Go Digit-promoter-backed Valueattics,” said Balasundaram R, secretary-general of the Insurance Brokers Association of India (IBAI). “Whether GIC Re will remove the entire 4% or if the 4% is going to be shared among the three reinsurers remains to be seen,” he added.
In FY25, GIC Re reported domestic premiums of Rs 30,662.44 crore, with obligatory business accounting for around 43% of its domestic business.
GIC Re itself has acknowledged the potential risks of a shift in this area. “If obligatory goes away, there could be a hit, a temporary setback to the top line. But on the flip side, it gives us greater control over our portfolio. The entire risk selection with our underwriting, will be based on our underwriting,” Sanjay Mokashi, general manager & chief underwriting officer, GIC Re, said during the company’s Q4FY25 earnings call.
Still, some believe any immediate disruption to GIC Re’s obligatory business is unlikely. “Under current regulations, a minimum operational period of three years is required before a reinsurer becomes eligible for obligatory business,” said Chiradeep Singha Roy, associate director – Reinsurance, Alliance Insurance Brokers.