The Indian reinsurance sector is set for a significant transformation. Valueattics Reinsurance, backed by prominent investors Prem Watsa and Kamesh Goyal, has been granted the first reinsurance license to a private entity by the Insurance Regulatory and Development Authority of India (Irdai). This approval, finalized in Debasish Panda’s last board meeting as Irdai chairperson, breaks the long-standing monopoly of GIC Re, a public-sector company that has been the sole player in the field.
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Irdai’s decision to grant Valueattics Reinsurance an “R2” approval signifies a major step towards fostering competition within the sector. While the company is one step closer to commencing operations, it must first meet the requirements of building up the necessary initial capital. This will allow them to begin operations.
Valueattics Reinsurance is owned by Oben Ventures LLP, spearheaded by Goyal, and FAL Corporation, which is backed by Watsa with Fairfax Financial Holdings. Goyal, commenting on the development, stated that the Digit group of companies (general insurance, life insurance, and reinsurance) seeks to become a one-stop solution for all insurance needs.
GIC Re has been the dominant player in the Indian reinsurance market since 1972. Following the liberalization of the insurance sector in 2001, GIC Re was designated as the national reinsurer and had the advantage of first refusal and “obligatory” cession. Recent data shows that 39% of GIC Re’s domestic earnings came from obligatory business, with the remaining 61% from non-obligatory sources.
Presently, 13 foreign reinsurance branches (FRBs) from global reinsurance firms such as Munich Re, Swiss Re, and Lloyd’s of London operate in India. ITI Re had previously received Irdai approval in 2016 but surrendered the license before starting business. In 2018, Irdai had rejected a proposal from Go Digit to acquire ITI Re, which was established by The Investment Trust of India.
Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, shared his view of the initiative, suggesting the possibility of capital requirement challenges due to the extent of risk retained and ceded. He emphasized the necessity for ratings from Irdai-approved agencies and adherence to investment regulations in India. He noted that reinsurance is a capital-intensive segment that demands technical expertise and a comprehensive understanding of the business.
A reinsurance expert, speaking anonymously, added that the development is beneficial for the industry. They highlighted the deep financial resources and expertise of the promoters and noted the importance of securing ratings for international business based on the company’s capital base, balance sheet strength, systems, and human resources.
During the March 12th board meeting, Irdai also approved the budget for 2025-26 and considered investment considerations for public-sector general insurers in health insurance. Additional topics included in the meeting were Bima Sugam, risk-based capital, and the implementation of Ind AS (IFRS). The status of a risk-based supervisory framework was also discussed.
Valueattics Reinsurance is slated to commence operations with an initial paid-up capital of ₹210 crore. This development signals a paradigm shift in the Indian reinsurance landscape, promising increased competition and potentially leading to innovative insurance solutions. The industry awaits the impact of this new entrant with great interest.
