Predicting the Financial Health of GIC Re: A Study on the Indian Reinsurance Sector

Abstract

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Reinsurance is one of the most important tools in the hands of insurers, to transfer the risk that is beyond their financial boundaries. General Insurance Re (GIC Re) has a very prominent status in the Indian reinsurance sector. The present study aims to determine and analyse the prediction of bankruptcy of GIC Re by using the modified Altman Z”-score (1968) model, in the backdrop of the COVID-19 pandemic and the rising competition in the domestic reinsurance market. The approach of the paper has been a descriptive one, with the use of the purposive sampling technique. The study reveals that GIC Re has been facing financial difficulties during the period of study from 2017 to 2021, and there remains the significant possibility of GIC Re going into financial distress. The state-owned reinsurer needs significant improvement in its financials to arrest financial distress and avert permanent bankruptcy in the near future. The implications arising from the study can be considered in terms of managerial policy decisions.

Keywords: Reinsurance, GIC Re, Modified Altman Z”-Score, Financial Distress, Bankruptcy

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