As his domestic turf is under threat, GIC managing director P B Ramanujam plans to strengthen the sole national reinsurer's prospects outside India

Chennai: "It sounds Greek (or Latin) to me." You will never hear General Insurance Corporation of India (GIC) managing director P B Ramanujam say this. This polyglot is not only fluent in these two languages but also in Bengali, Hindi, Tamil (his mother tongue) and English.

"Greek is a majestic language while Latin is sweet. But English is the bastard," says this 59-year-old insurance expert, a chartered accountant by profession. Ramanujam has this exquisite habit of describing the etymology of the English words that catches his fancy during a conversation.

More than that, it is his witty one-liners that will stump you. Sample one. "By banning marriages can you prevent population growth," he poses this question while talking about whether non-life insurers are exhausting GIC's reinsurance capacity first before reinsuring their risks abroad.

Talking about GIC, the times are going to be tough for the sole national reinsurer. When global primary insurers are already in India it won't be long for foreign reinsurers to set up shop here.

Global giant Munich Re is planning to tap the lucrative Indian market in partnership with Reliance. The move not only makes Reliance an integrated insurance player with a presence in general, life and reinsurance sectors but also seriously threatens the national reinsurer. Demands are also being made to allow foreign reinsurers to transact business via branch offices instead of incorporating a separate company partnering with an Indian company.

"Our apprehension is that a major portion of facultative insurance (reinsurance for large risks) will be poached by the Munich Re-Reliance joint venture outfit," says Ramanujam. Nearly one-fourth of GIC's Rs 3,500-crore portfolio consists of facultative business.

With his domestic turf under threat, Ramanujam is seeking to strengthen GIC's prospects outside India. Spending nearly an hour with domain-b.com, he talks about his competitive strategy.

Some of the strategies include taking 5 or 6 per cent equity stake in East Africa Re and some in an Egyptian insurance company. GIC has also agreed to share its business with reinsurers in the African and Asian region. Excerpts from the interview:

You have said that the entry of Munich Re will seriously affect your facultative treaty portfolio. So what is your counter strategy?
We will go abroad to new markets. We plan to take 5 or 6 per cent equity stake in East Africa Re. Though the African region doesn't have many mega-sized industrial projects, it does have a good number of medium and small industries. We recently conducted the Afro Asian Reinsurers Summit in Mumbai, which was attended by all the major reinsurers in this region.

All of them agreed to exhaust first the Asian reinsurance capacity and then go to the Western reinsurers. India will play an important role in the reinsurance field in this region. Most probably the chairmanship of the Federation of Asian Insurer and Reinsurer will come to India this year. GIC is considering acquiring some equity stakes in an Egyptian insurance company promoted by a bank.

What about your existing overseas operations?
Right now we have representative offices in London and Moscow through Ken India [a joint venture between GIC and Life Insurance Corporation of India] and we are planning to upgrade the same into a branch office. The representative office is like a liaison office and cannot underwrite any business, whereas a branch can do business. We will also open branches in Tanzania, the Middle East (Bahrain or Dubai) and one in South Africa. We have also authorised some brokers to underwrite business on our behalf, subject to certain conditions.

What is your underwriting capacity?
Normally the underwriting capacity is three times that of the net worth. Our net worth is Rs 3,400 crore and our total capacity is Rs 10,200 crore. But our premium income is around Rs 3,500 crore. All the insurers have to compulsorily place 20 per cent of their reinsurance business with us. The logic being, in the event of failure of an overseas reinsurer, at least 20 per cent of the claim could be paid by us.

Tell us about GIC's business performance?
For the year 2002-03 our business was around Rs 3,500 crore. The domestic business was around Rs 2,600 crore and foreign Rs 450 crore. The break-up of domestic portfolio will be: motor insurance 38 per cent; fire 30 per cent; marine 9 per cent; and miscellaneous 23 per cent. The aviation and crop insurance business contributed around Rs 95 crore and Rs 300 crore, respectively. The crop insurance business has been hived off into a separate company. With respect to foreign business, 69 per cent will be fire insurance. We are not in the business of reinsurance casualty portfolio of foreign insurers.

What is your net retention of premium?
Our net retention is 80 per cent. There is no reinsurance programme for the motor portfolio. The underwriting results for the year 2002-03 is expected to be good as there were no major losses during that period. The yield on investment has come down. Last year's investment income will be around Rs 925 crore.

Brokers play a vital role in reinsurance. How do you make sure that you are not taken for a ride by the brokers?
In domestic business we will deal only with brokers licensed by the Insurance Regulatory and Development Authority IRDA. We have internally developed a rating mechanism to rate brokers and their engagement will be transparent. In foreign business we have authorised some brokers to take decisions on our behalf with proper checks and balances.