Mumbai: The non-life segment will lead the recapitalisation drive in the domestic insurance sector, as the industry as a whole may raise up to Rs. 8,000 crore over the next five years to shore up equity capital, according to a report by Icra.
The rating agency said in Mumbai on Wednesday that it sees general insurers raising more capital as the life sector is already well-capitalised.
"We see capitalisation happening in non-life insurance segment falling in the range of Rs. 4,500 crore to Rs. 8,000 crore over the next five years, led by non-life players," Icra senior vice president and co-head of financial sector for ratings Vibha Batra said.
Private sector non-life insurers would raise capital to maintain their compounded annual growth rate (CAGR) at 15-20 per cent during the next five years. Around 60-70 per cent of this capital infusion should come from foreign partners to increase their solvency ratio from the current minimum requirement of 1.5 per cent to 1.75
per cent in the days to come, she said.
The life insurance sector, which is currently growing at a CAGR of 10-12 per cent, does not require capital infusion.
"However, keeping in view the fact that the country is under-penetrated, we do see some capitalisation happening in the life sector too," she said, adding that this capitalisation would be comparatively more in the traditional policy segment than in unit-linked insurance plans.
The Icra report further said nine life insurers have solvency margins double than that of the regulatory requirement of 1.5 per cent and hence there is no imminent capital requirement for them.
