Global reinsurance companies will no longer offer unlimited terrorist cover. Following the move, Insurance companies in India are busy tracking their exposure across the country "pincode wise" on the request of overseas reinsurers. This is part of the global strategy to cap exposure on terrorist risks. The collated data will throw better light at the time of renewals in terms of premium and cap on exposure to terrorist cover.
A global reinsurance company official said: "We want to control our exposure where there is a high accumulation of terrorist cover granted. We have asked all insurance companies for the necessary data prior to the renewal of treaties."
Unlike in the west, the Indian market offers terrorist cover in any primary insurance policy.
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That is to say, no additional premium is levied for covering terrorism. In the west, this is not the case as additional premium is charged should a policyholder wish to insure his property against terrorist attacks.
Global underwriters have decided to identify the accumulation of terrorist exposure region wise and study where the maximum business risks have been written. "It is essential to have a good spread. Otherwise, in cases where there is a high concentration of terrorist risks, we will cap our exposure," said the reinsurance company official.
Reinsurers are deliberating on the possibility of segregating the terrorist cover from the primary policy. Alternatively, terrorism is likely to be sub-limited to a percentage of the sum assured (value of the policy). At present it stands at 100 per cent of the sum assured. According to reinsurers, it is likely to be capped at 50 per cent of the sum assured.
This strategy to be adopted is a reflection of the global scene. The reinsurance market has dried up considerably post September 11 attacks on the US. Lloyds of London alone has forecasted claims in the region of $ 10 billion. As the world market looks at claims touching $ 40 billion, many smaller insurance players are expected to go out of business.
With shrinking capacities and huge claim payments in the offing, leading reinsurance companies intend to cap their exposure. Reliance's cover comes up for renewal on December 25. Even as the insurance company is prepared for payment of higher premiums, the critical question today is whether Reliance will be able to secure the same amount of coverage as it did last year. Pricing is secondary, said an insurance company official.
Indian Petrochemical Corporation Ltd was "just lucky", as its premium shot up by 60 per cent over the preceding fiscal, said the official. IPCL was among the first corporates to renew its insurance cover just after the September terrorist attacks.