Insurers ramp up catastrophic cover as monsoon arrives

The experience of the last monsoon "� especially in Mumbai and some other parts of Maharashtra and parts of Gujarat "� has taught state-owned general insurance companies a lesson.

This time, they have become more proactive and have ramped up their reinsurance products for natural calamities that cover risks arising from floods, storms, earthquakes "� catastrophic cover "� by Rs 300 crore to Rs 1,150 crore for 2006-07.

V Jayaprakash, deputy general manager, United India Insurance, said, "We had to go in for additional layer of catastrophic cover of Rs 50 crore last October for covering the monsoons, expected in south India, since the already existing cover up to Rs 350 crore was exhausted by the Mumbai floods itself, last year."

Thus, to mitigate the risk arising from insuring catastrophic cover, the company has increased its reinsurance cover by Rs 100 crore to Rs 450 crore for the current year.

Of the reinsurance covers taken by insurance companies in terms of value, catastrophic cover would be the largest as it covers the risk arising from natural disasters compared with other covers like motor, personal accident, cargo and hull, among others.

For reinsurance, insurance companies have to insure at least 20 per cent of their risk with the Indian reinsurer, General Insurance Corporation of India, and the remaining can be insured with overseas reinsurance companies.

Reinsurance companies do cover large-value claims by distributing them among various companies. Significantly, the premium "� the price of reinsurance "� charged by reinsurers has not increased much for public sector companies, for the current year, in spite of huge losses arising from hurricanes such as Katrina and Rita in the US, floods that was experienced in Mumbai, and other natural calamities elsewhere.

M Ramdoss, chairman and managing director of Delhi-based public sector insurer Oriental Insurance, too, said his company has increased its catastrophic cover by Rs 100 crore to Rs 350 crore for the current financial year.

National Insurance Company Chairman and Managing Director V Ramasaamy said the state-owned insurance company's claims arising from floods last year were valued at Rs 450 crore, of which the company had re-insurance cover for Rs 375 crore, leaving the remaining Rs 75 crore claims for it to bear. So, Kolkata-headquartered insurer has scaled up its catastrophic cover by Rs 100 crore to Rs 350 crore for 2006-07.

Private insurance company Bajaj Allianz said it has ramped up its catastrophic cover by 60-80 per cent for the current financial year, as the premium charged by reinsurance company had gone from the previous year levels.

However, other private players like ICICI Lombard and Tata AIG have not raised their cap on catastrophic cover. Insurers can go in for additional catastrophic cover during the year if they require, but the premium charged will be higher depending on the events of the year.

Dalip Verma, managing director, Tata AIG General, said, "We had the largest loss on account of Mumbai floods, since the firm's inception in 2001. The catastrophic cover we had at the time was more than adequate to cater to the loss and, therefore, we have maintained the same level of catastrophic coverage this year as well."

Last year, the domestic general insurance industry had more than 48,000 claims, approximately valued at Rs 2,900 crore, on account of flood losses. Tata AIG 's share was less than 5 per cent of that, he added.