The ratings reflect GIC Re’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.

GIC Re’s balance sheet strength reflects solid risk-adjusted capitalization that is supported by modest underwriting leverage compared with other global reinsurers. Its capital and surplus is sizable, standing at INR 485 billion (USD 7.5 billion) as of March 31, 2017.

The favorable business profile reflects the company’s solid market position in India. GIC Re is the country’s main reinsurer and holds a significant share of the reinsurance market. It continues to have close relationships with direct insurers in India, and regulations give it an advantage in obtaining reinsurance placements. In addition, GIC Re maintains a geographically diversified underwriting portfolio with access to a sizable amount of business outside of India.

An offsetting rating factor is the potential strain on GIC Re’s risk-adjusted capitalization due to increasing underwriting leverage, partly attributable to rapid growth in crop premiums. As part of a nationwide effort by India’s government to extend insurance coverage to farmers, crop insurance now comprises a substantial proportion of the market. GIC Re retains most of the risks pertaining to crop insurance. Additionally, because equities form a considerable proportion of the company’s investment portfolio, its capital and surplus could be volatile in times of stock market turbulence.

GIC Re is well-positioned at its current rating level. Negative rating momentum could result from material deterioration in the company’s risk-adjusted capitalization or operating performance.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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