Many factors affect the low numbers of insured among Generation Y.
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of General Insurance Corp. of India (GIC Re) (India).
The outlook for both ratings is stable.
The ratings reflect GIC Re's strong risk-adjusted capitalization and its prominent business profile in the Indian and overseas reinsurance markets.
GIC Re's capital and surplus amounted to INR 247.6 billion for fiscal year 2011-12, which was a decrease of 13.5 percent from INR 286.4 billion for 2010-11. GIC Re's capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), also weakened in fiscal year 2011-12, mainly due to capital provisioning against the Indian Motor Third Party Insurance Pool (IMTPIP) and natural catastrophe losses in 2011-12. Nonetheless, GIC Re continued to maintain low underwriting leverage and sound liquidity. GIC Re's capitalization is adequate for its current rating level.
GIC Re is the sole domestic reinsurer in India and continues to influence the underwriting discipline of the domestic market through its market leadership. GIC Re emphasizes its customer relationship management and offers risk rating services to its Indian and overseas clients.
Despite the worsened underwriting performance for fiscal year 2011-12, GIC Re continues to show improvement in its expense ratio, mainly attributed to the decreasing trend in the net commission ratio as a result of continuous reductions in flat commission and the introduction into profit commission.
Offsetting these positive rating factors is GIC Re's high exposure to equity market volatility and increasing catastrophe exposure.
GIC Re is subject to high investment risk predominantly due to a high proportion of investment in equity securities. As at March 2012, the market value of GIC Re's equity investment was around 40 percent of its total assets. Volatility in the Indian equity market can have a direct impact on GIC Re's capitalization level through the fair value change account.
GIC Re's catastrophe exposure has increased in recent years, as a result of the growth in its domestic and overseas business. Global natural catastrophes that occurred in 2011, including the Thailand Flood, Christchurch and Japanese earthquakes, had a material impact on GIC Re's underwriting result.
Future upward rating actions could occur if GIC Re demonstrates the ability to achieve a consistently favorable underwriting and operating performance, improve its risk-adjusted capitalization and strengthen its investment, underwriting and catastrophe risk management capability. Conversely, negative rating actions could occur if the company's risk-adjusted capitalization declines to a level below A.M. Best's expectations, or if the company's operating performance deteriorates significantly.
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