Post free pricing in 2007, the RoCE declined due to competitive pricing for commercial business. Administered premium rates for Motor TP liability insurance, poor investment scenario following the global economic crisis that began in mid-2008 and the regulatory prescription for clean cut reserving for Motor TP Liability (arising from the dismantling of the IMTPIP) in 2011 were contributory factors for the steep drop in ROCE from 2007 to 2011.
Additional infusion of fresh equity capital by private sector insurers to ensure they maintain the prescribed solvency margin norms had its effect on RoCE. Deteriorating claim ratios in health insurance business has necessitated additional capital infusion in Standalone Health companies also, thereby impacting RoCE.
The recovery seen in RoCE since 2011 is attributable to growth in Health Insurance Portfolio and revision in Motor TP as well as robust income from investment funds of the insurer partly to both increase in Motor TP administered rates every year and increase in investment incomes.
Return on Capital Employed - 10- Year Trend
Source: Council Compilation as per source
data submitted by companies