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We will grow 10-fold in 5 years in India

Ludger Arnoldussen, Member (Board of Management) and in charge of Asia, Australia, Africa and Germany at global reinsurance giant Munich Re Group, was in India recently to take stock of the company’s business in the region. Ludger spoke to BT about his business in general and its prospects in the near future. Excerpts:

     Print Edition: October 21, 2007

Ludger Arnoldussen, Member (Board of Management) and in charge of Asia, Australia, Africa and Germany at global reinsurance giant Munich Re Group, was in India recently to take stock of the company’s business in the region. Despite a hectic schedule of meetings with clients, Arnoldussen, 45, took time out to speak with BT’s E. Kumar Sharma about his business in general and its prospects in the near future. Excerpts:

Question: How does India compare with your major growth markets?

Answer: The three biggest growth areas are China, India and the Gulf region. We have already seen a lot of growth in the Chinese market. In 2003, we were able to open a re-insurance branch there, something we are waiting to do in India (current norms do not allow that). We have now a volume of $300-$350 million (Rs 1,200-Rs 1,400 crore) and we can participate in all kinds of re-insurance. In India, there are still limitations to our activities on the re-insurance side; we have not been able to set up a re-insurance branch until now.

So how do you conduct business and grow client relationships out of India ?

Ludger Arnoldussen
Ludger Arnoldussen
 

Answer: We have a representative office in Kolkata since 2000 that maintains client relationships and provides us with market intelligence. The underwriting is done out of our head office in Munich. We also hold a lot of client seminars either in India or invite our clients to Munich. We have contact with almost all the players in the Indian market and do business with them to a large or a small extent. But there’s a limit to the re-insurance that we can write from Munich.

Question: Why would the regulator object to you from setting up a branch here?

Answer:(Sanjib Chaudhuri, Chief Representative in India for Munich Re, answers this.) In fact, we hear that the regulator has recommended the setting up of branches. It’s now in the hands of the Group of Ministers that is looking into the new insurance Bill.

Question: Re-insurance calls for a lot of expertise. How well are you equipped to address these needs out of India ?

Answer: We have 6,900 employees worldwide, including a number of experts in life, health, geo-sciences and engineering. There are teams that have designed exposure models for earthquake, floods, etc. We have recently developed an earthquake model for India, so we bring our expertise on geology, and with the data from the local companies, we can evaluate for each client what is the maximum loss they would have to expect for a 100-year or 500-year event so that they can sensibly design their re-insurance protection.

Question: How has your risk-based pricing approach impacted Indian companies? Why do some of them seem unhappy with it? We carry very large risks like earthquakes and big industrial risks. We were unable to continue some re-insurance contracts we entered into last year because we did not agree on pricing.

Answer: We carry very large risks like earthquakes and big industrial risks. We were unable to continue some re-insurance contracts we entered into last year because we did not agree on pricing.

Question: How do you picture yourself in India five years from now?

Answer: I expect that we will have a nice branch office with a good team having good contacts with the clients, and a broader scope of business. In terms of premium volumes, in five years it should be in the region of $200 million (Rs 800 crore). Currently, it is around $25 million (Rs 100 crore). So, there will be almost a ten-fold increase in five years. But that will be possible only if the profitability of the market goes in the right direction and we are free to write whatever we think is fit, with a branch here.

Question: But, if the norms remain as they are today, where will you reach five years from now?

Answer: Without the branch, in five years time... I do not want to think about that really because I find that a horrible vision. However, if it were to be the same as today then, maybe, we will grow from $25 million to $50 million or thereabouts.

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