General Insurance Premiums To Touch Rs 3.24 Lakh Crore In FY2026: ICRA

New Delhi, Jun 3 (KNN) India's general insurance sector is expected to witness improved growth momentum in the current financial year after experiencing a slowdown in the previous period, with private sector insurers positioned to outperform their public sector counterparts, according to a recent analysis by rating agency ICRA.

The gross domestic premium income (GDPI) of general insurance companies is forecast to increase to Rs 3.21-3.24 lakh crore in FY2026, representing growth of 8.7 percent compared to Rs 2.97 lakh crore recorded in the previous financial year.

The rating agency projects further acceleration to 10.9 percent growth in FY2027.

Several factors are expected to drive this recovery, including disciplined pricing strategies in commercial insurance segments, continued expansion in health insurance, and anticipated growth in vehicle sales compared to FY2025.

However, these positive drivers will be partially offset by the ongoing impact of new accounting regulations known as the 1/n method, which is expected to continue affecting the industry during the first half of FY2026.

The insurance industry experienced a significant deceleration in FY2025, with GDPI growth moderating to 6.5 percent year-on-year from 15.5 percent in the previous year.

This slowdown was attributed to reduced economic activity, declining vehicle sales, and the implementation of the 1/n accounting method that took effect on October 1, 2024.

Private sector insurers are projected to strengthen their market position, with their share of total GDPI expected to increase to 70 percent by FY2027, up from 68 percent in FY2025.

These companies are anticipated to benefit from improved underwriting performance supported by better pricing discipline, despite facing challenges from higher combined ratios in FY2025 due to increased loss ratios in the motor insurance segment and elevated expense ratios resulting from regulatory changes affecting long-term policies.

In contrast, public sector insurers face significant headwinds due to weak capital positions that are expected to constrain their growth potential. While their combined ratios are projected to improve, they will remain at levels that negatively impact net profitability compared to private sector peers.

The capital requirements for public sector insurers present a substantial challenge, with ICRA estimating that three public sector units, excluding New India Assurance, will need Rs 152-170 billion by March 2026 to maintain the required 1.50x solvency ratio.

This calculation assumes full regulatory forbearance on Fair Value Change Account provisions.

As of December 2024, the solvency position for these three public sector insurers remained critically weak at negative 0.85 times the regulatory requirement when excluding fair value changes on investments, highlighting the urgent need for capital infusion.

Meanwhile, private sector players maintain comfortable capitalisation levels that position them to capitalise on expected strong growth in the sector.

(KNN Bureau)