GIC News

    GIC may be recast as exclusive national reinsurer

    GIC’s December meet to deliberate crucial issues

    East Asian economic turmoil forces GIC to defer equity hike
 

GIC may be recast as exclusive national reinsurer

 The Insurance Liberalisation Bill is expected to pave the way for making the General Insurance Corporation of India as the national re-insurer to which all companies would be  mandatorily required to cede a specified amount of the premium written within the country. Presently GIC functions as a national reinsurer through a voluntary arrangement between itself and its subsidiaries. The Malhotra Committee had recommended that GIC should cease to be a holding company and should function exclusively as a reinsurer under the Insurance Act. The standing parliamentary committe on finance had also suggested that IRA should be provided with the powers to regulate reinsurance and control both the inward and outward flow of insurance business. However, it is understood that the government is against delinking the subsidiaries from GIC immediately. The details of reinsurance arrangement will be worked out by the IRA soon.
 

GIC’s December meet to deliberate crucial issues

 There are indications that GIC may seek to redefine the role of its subsidiaries in the coming months. According to sources, one of the significant subjects on which discussions may be carried out in the meeting (which will be attended by the GIC Chairman and Managing Directors, CMDs of the four subsidiaries) will be whether to grant more functional autonomy to the subsidiaries, especially in investments. However, according to the GIC chairman Mr Sengupta, while the subsidiaries themselves are seeking independence, under the present circumstances, autonomy may create disparities and cause confusion in some areas like determination of wages.

 Though the Malhotra Commitee has recommended that the four subsidiaries should function as independent entities, it is felt in industry circles that working together in certain areas by the subsidiaries could be beneficial, especially to take on private players when the sector is opened up. In this context, Mr. Sengupta’s observations that ‘there should be a mechanism for regular coordination and exchange of ideas among the subsidiaries and the holding company and this could be on matters like underwriting, claims settlement, marketing, expansion and closure of offices assumes significance. Among a host of technical issues, the December meeting is expected to explore areas like growth versus surplus generation.
 

East Asian economic turmoil forces GIC to defer equity hike

 The East Asian economic turmoil has forced the GIC to defer its plans for an equity expansion of its Singapore-based subsidiary - India International Insurance Pte Ltd. It was felt that the equity expansion would help in expanding its business. Among the alternatives considered by the GIC and the government for an equity recast of the company were either a disinvestment of the existing shares of the subsidiary at a premium or an equity expansion.  Sources say that though the GIC has already obtained the permission of the Reserve Bank of India to divest its equity upto 33% in its foreign subsidiary, the opinion was strongly in favour of the equity expansion route. It is also reliably understood that GIC is working on a proposal to consolidate all its foreign operations under one subsidiary.