Warren Buffett, who had exited India three years back citing regulatory suffocation, can’t resist India any more.Berkshire Hathaway is in fact returning to India with a plan to set up a reinsurance branch which would be much bigger than what it was when it was into insurance broking.
In January this year, Berkshire’s reinsurance unit Gen Re roped me in to head its reinsurance branch in India, said Venkatesh Chakravorty, principal officer Gen Re India. We have submitted our R1 application with the insurance regulator.
Berkshire had closed its online distribution two years after it began operations in 2013, as the online model failed to take off in a big way. It did not respond to an email query till the time of going to press.
Currently, Berkshire is present in India as a services company and is a leader of reinsurance treaty purchased by insurers from one or more other companies of large insurance companies including Bajaj Allianz General Insurance.
Buffett’s reinsurance unit, the biggest profit earner for the investor and headed by India-born Ajit Jain, has been reluctant to commence business in India, citing stifling regulations and the fact that the country still does not allow 100% foreign ownership in the industry.
Like a foreign bank, the Indian reinsurance branch will be able to operate a lot like an Indian reinsurance company. The Gen Re branch in India will be able to accept risks locally, underwrite, do actuarial pricing and settle claims.
Non-life insurance companies reinsure their liabilities to lower their burden in the event of high claims.
Insurers get into agreements with reinsurance companies in the form of a treaty, which is renewed every fiscal. Berkshire is selective in choosing its business.
The Insurance Laws (Amendment) Act, 2015 allowed insurance companies to set up reinsurance branch.
After 16 years private insurers being allowed into the sector, GIC Re is the sole national reinsurer providing reinsurance to the direct general insurance firms in India.