For mandatory catastrophe insurance to become a realistic proposition, much remains to be done, say experts.
“We are in discussion with the National Disaster Management Authority (NDMA) to introduce a catastrophe cover for Indian citizens. However, it is at a very early stage of discussion,” G Srinivasan, chairman and managing director of New India Assurance said.
In India, there are covers to protect property and life from specifics such as fire, floods or earthquake. However, there is an absence of a ‘natural catastrophe cover’ to cater to the needs of people. If any such event occurs, insurers and re-insurers have to make high payouts to cover the losses.
“While the pool concept was mooted, we are yet to get a clarity on how this model will work. This is because the pricing model has not been fixed. We need better coordination with the authorities concerned to finalise the model,” said a senior executive of a public general insurer.
Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, said pricing stability is required before the pool is formed. He added that the formation of a pool would not be an easy process, as issues like the type of covers and mechanism of distribution of money have to be first be resolved.
Reinsurance is another issue that has dissuaded further steps. The chief executive of a private general insurance firm said at least 60-65 per cent of the risks would have to be reinsured, to enable them to provide cover. “Since the risks associated with this segment are very high and we do not have the pricing and pool mechanism in place, reinsurers are not very comfortable in taking a big exposure in this segment in India, at present,” he said.
According to Aon Benfield’s Annual Global Climate and Catastrophe Report, there was an estimated economic loss of Rs 1517.1 crore in 2012 from natural disasters in India.
A Swiss Re study had said in 2011, insured losses from global natural catastrophes exceeded $110 billion, the second-highest catastrophe loss year ever for the sector. A recent report from catastrophe modelling firm AIR Worldwide showed a seven per cent probability of loss level or greater than this in any given year.
“We are in discussion with the National Disaster Management Authority (NDMA) to introduce a catastrophe cover for Indian citizens. However, it is at a very early stage of discussion,” G Srinivasan, chairman and managing director of New India Assurance said.
In India, there are covers to protect property and life from specifics such as fire, floods or earthquake. However, there is an absence of a ‘natural catastrophe cover’ to cater to the needs of people. If any such event occurs, insurers and re-insurers have to make high payouts to cover the losses.
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A pool-based concept, earlier mooted by the finance ministry, was later backed by general insurers. If a pool is formed, on the lines of the terrorism-pool, the losses would be distributed evenly. The pool would consist of regular premiums being made by common citizens, with or without additional government funds infused.
“While the pool concept was mooted, we are yet to get a clarity on how this model will work. This is because the pricing model has not been fixed. We need better coordination with the authorities concerned to finalise the model,” said a senior executive of a public general insurer.
Sanjay Datta, head of underwriting and claims at ICICI Lombard General Insurance, said pricing stability is required before the pool is formed. He added that the formation of a pool would not be an easy process, as issues like the type of covers and mechanism of distribution of money have to be first be resolved.
Reinsurance is another issue that has dissuaded further steps. The chief executive of a private general insurance firm said at least 60-65 per cent of the risks would have to be reinsured, to enable them to provide cover. “Since the risks associated with this segment are very high and we do not have the pricing and pool mechanism in place, reinsurers are not very comfortable in taking a big exposure in this segment in India, at present,” he said.
According to Aon Benfield’s Annual Global Climate and Catastrophe Report, there was an estimated economic loss of Rs 1517.1 crore in 2012 from natural disasters in India.
A Swiss Re study had said in 2011, insured losses from global natural catastrophes exceeded $110 billion, the second-highest catastrophe loss year ever for the sector. A recent report from catastrophe modelling firm AIR Worldwide showed a seven per cent probability of loss level or greater than this in any given year.