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Unveiling the Factors Affecting Profitability of Reinsurance Companies

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  • Amarjit Singh Sidhu
  • Neha Verma

Abstract

General Insurance Corporation or GIC Re is a quintessential reinsurer of India. The company is among the premier financial institutions of the country. It has been the only domestic reinsurer of India since many years. Recently from December 2016, with the approval of Insurance Regulatory and Development Authority (IRDA), many unassailable international reinsurers have made their foray into the Indian market. Besotted by the recent supple regulations of the Indian reinsurance market, many other international reinsurers are interested to carve a niche in the Indian market. As such it becomes imperative to keep an eye on our own unfettered reinsurer which has to confront the competition posed by these highly adept reinsurers in the changing scenario. In this article, an attempt is made to ascertain the factors affecting the profitability of GIC Re. Profitability has been chosen as it is often considered as the salient parameter of a company’s success. For this purpose, Auto Regressive Distributed Lag (ARDL) model has been used on the quarterly data of GIC Re from 2005 to 2016. It is found that investment income, underwriting profitability and premium growth significantly affect the profitability of GIC Re both in the short and long run.

Suggested Citation

  • Amarjit Singh Sidhu & Neha Verma, 2017. "Unveiling the Factors Affecting Profitability of Reinsurance Companies," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 42(3), pages 190-204, August.
    • Handle: RePEc:sae:manlab:v:42:y:2017:i:3:p:190-204
    DOI: 10.1177/0258042X17720062
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