The country's national reinsurer, GIC Re, will be listed on the National Stock Exchange (NSE) on October 25. GIC Re's IPO, which was open from October 11 to 13, was subscribed 1.37 times. The IPO received bids for 17,06,99,808 shares against the total issue size of 12,47,00,000 shares, data available with the NSE showed.
GIC Re is all set to emerge among the top 10 global reinsurers and figure among the 40 largest Indian rpt Indian corporates, both in terms of market capitalisation. From its current ranking of 12 largest global reinsurer, the company is set to grow to the 10th spot during the current fiscal, given its healthy growth rate, a market source said. At present, GIC Re is also the 3rd largest reinsurer in Asia.
It is also likely be the second largest Indian entity in the financial sector PSU listed space after SBI, the source added. Alongside SBI, GIC Re is the country's leading MNC in financial sector with a global presence - it has branches in London, Dubai, Kuala Lumpur and a subsidiary in South Africa.
Analysts point out that diversification is the key in risk management and GIC Re writing business from most parts of the world already has good diversification. The insurance and reinsurance industry is the latest to join the palette of choice for Indian equity investors in recent times. "An interesting thing about the industry is that in some ways, it does not follow the economic cycle experienced by all other industries," an analyst said.
Its fortune is more dependent on the man-made and natural disasters witnessed in the country or region where they write business from, he said. Globally, this feature has attracted significant funds from hedge funds and pension funds into the industry. In the Indian context, GIC Re is the only reinsurer where investors can put their money in, he said. GIC Re, he said, with its reinsurance business from over 160 countries, offers an interesting investment choice.
The Indian insurance market is entering a new phase after more than a decade-and-a-half of opening up of the sector which saw a spate of new private insurers setting up shop, many of them joint ventures with global insurers. As compared to insurance business, which tends to be concentrated in a country or region, reinsurance business, though similar, usually has a global character and is akin to wholesale insurance business.
Providing insurance to insurers, reinsurers get involved with mega-risks and concentration of risks against natural and man-made calamities. This requires scale, strong balance sheet with good solvency ratio and diversification in the risk book. GIC Re has shown very impressive growth trajectory during the last few years.
This can be expected to continue given that there is continued emphasis by the government on the increasing the land under crop insurance. With a country size that matches a continent and with over a dozen agro-climatic zones (as per National Agricultural Research Project), there is natural risk diversification in crop risk portfolio, analysts said.