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June 05,2017

Premium growth at a decadal-high: Non-life insurance industry update

Subordinated debt issuances, or hybrid bonds, have emerged as a major source of growth capital – and higher solvency ratio1 cushion – for non-life insurers. As many as seven of them raised Rs 2,181 crore in fiscal 2017, and more issuances are on the cards with non-life premium growth expected to be buoyant this fiscal.
 

Subordinated debt issuances,
or hybrid bonds, have emerged
as a major source of growth
capital

In December 2015, the Insurance Regulatory and Development Authority of India (IRDA) allowed insurers to raise non-equity forms of capital such as subordinated debt or preference shares, which qualify as regulatory capital, and help improve the solvency ratio of insurers. 

The first hybrid bond issuance was in July 2016, and since then seven non-life insurers have tapped the debt market with March 2017 alone seeing four of them raising Rs 1,166 crore. CRISIL has rated five issuances thus far aggregating Rs 2,008 crore, which has been placed at competitive yields.