Nonlife insurers have found a new alternative in subordinated debts or hybrid bonds to raise capital.
As many as seven of the 31 nonlife insurance companies have raised INR2,181 crore (US$338.7 million) in the financial year ended 31 March 2017 through hybrid bonds, reported Press Trust of India citing the rating agency CRISIL. More issuances of such bonds are expected.
Mr Gurpreet Chhatwal, president of CRISIL Ratings, said, “Subordinated debt issuances have emerged as a very good alternative to equity as they enable insurers to raise capital at an optimal cost. Hybrid issuances will gain impetus, given buoyant growth prospects for non-life insurers.”
The first hybrid bond issuance was in July 2016, after IRDAI allowed in late 2015 insurance companies to raise capital through non-equity forms such as preference shares or subordinated debt.