General Insurance Corporation of India (GIC Re) has demonstrated notable improvement in its financial strength, according to AM Best, which assessed the reinsurer’s balance sheet as “very strong” for the fiscal year 2024 (FY 2024). The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has followed a positive trajectory over the past four years and maintained its strongest level this year.
A key factor behind this robust capitalization has been a significant rise in shareholders’ equity, primarily fueled by gains in the fair value of investments and increased retained earnings. AM Best anticipates that GIC Re will be able to uphold this capital strength over the medium term. However, the company’s heavy exposure to domestic equity investments presents a potential risk, which may temper its overall financial outlook.
Despite some challenges in underwriting, GIC Re’s overall operating performance is rated as adequate. The company achieved a five-year average return on equity (ROE) of 6.5% between FY 2020 and FY 2024. Notably, in FY 2024, GIC Re reported a consolidated ROE of 9.5%, even in the face of unprofitable underwriting activities and a high combined ratio. Much of the company’s earnings have been buoyed by investment income, particularly realized gains on equity investments, compensating for the lack of technical underwriting profits.
AM Best also recognized GIC Re’s business profile as favorable. As the 10th largest reinsurer globally, based on the most recent rankings of the top 50 global reinsurers, GIC Re continues to hold a dominant position in India, commanding a market share of 60% to 70% in recent years. This is largely attributed to its advantage from mandatory reinsurance cessions and its right of first refusal on domestic placements. GIC Re’s underwriting portfolio is diversified across various business lines and geographic regions, further enhancing its business profile.
In conclusion, while GIC Re faces challenges in underwriting profitability and risks tied to its domestic equity exposure, its strong capitalization and dominant market presence in India solidify its position as a key player in the global reinsurance industry.
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