NEWS
GIC Re fights back post-ratings downgrade
Rating downgrade hurt but strong relationships supported reinsurer back to better health, says GIC Re’s Ramaswamy Narayanan.
“Post COVID-19, we lost our rating. That was something which really hurt us but we continue to write our business because, honestly, we have a lot of long relationships which have gone over many years. People have supported us.”
This was the view of General Insurance Corporation of India (GIC Re) chairman-cum-managing director Ramaswamy Narayanan in an interview with Monte Carlo Today.
COVID-19 was declared a pandemic in March 2020 and soon after, in July that year, ratings agency AM Best downgraded the financial strength rating of GIC Re to ‘B++’ from ‘A-’, citing “deterioration in balance sheet strength”.
At the time, AM Best said, GIC Re’s risk-adjusted capitalisation declined to the “strong level” at year-end 2020, adding that this deterioration followed a 30 percent decline in the reinsurer’s reported capital and surplus in fiscal year 2020. This was due to a significant fall in the market value of its equity investments and reports of a full-year operating loss, the agency said.
“We wanted to ensure that our portfolio was very good.”
Ramaswamy Narayanan
Fighting back
Since then, GIC Re has been fighting back. Narayanan said GIC Re has been writing some business directly in spite of the rating downgrade. For other business the reinsurer has put in place funding partners, he said.
“One thing we were very clear about, post the rating downgrade, is that we wanted to ensure that our portfolio was very good; something that can withstand shocks.
“We’ve done this over the last three years. We are in a very good position.”
AM Best met with the reinsurer at the end of July. Narayanan said the business demonstrated it has now reached a position where it is doing better across all parameters. At the core of this is acceptable pricing.
“We are very clear about one thing: we need price adequacy. If price adequacy is not there, we’re not interested in writing business just for the top line—it needs to make a difference to the bottom line,” he said.
He added that the reinsurer is looking carefully at rate revisions in different markets.
“Various reports suggest that a $100 billion loss is very normal now. Unless we ensure that we are getting adequate premiums to cover those losses, it doesn’t make sense.
“Nat cat business is something that we will continue to write, but we’ll be very careful about it,” he concluded.
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