With the international reinsurance market hardening, general insurers are focusing on General Insurance Corporation (GIC) – the only designated national reinsurer. In fact, most non-life insurers have already gone in for a treaty arrangement with GIC as the lead reinsurer.
Recently, insurers had placed their risk with a number of new players in the international market after existing players starting feeling the pinch of the global financial crisis. Reinsurance majors Swiss Re and Munich Re even stressed on the need to increase premium rates, while emphasising on the underwriting practices of general insurance companies after they faced losses due to the financial turmoil.
They were concerned about the high discounts offered by the insurers. Industry sources said that Swiss Re has pulled back its reinsurance support which was extended to some insurance companies, including IFFCO Tokio. As for American Insurance Group (AIG), the trouble at the US-based reinsurer did not have any impact on the insurance market as insurers only seek Facultative Reinsurance Support from AIG. Fac Re is mainly done on a case-to-case basis.
Other players like Lloyd’s, Asia Capital Re, Allianz and Hannover Re have participated in the treaty renewals. GIC had brought down commission rates in the obligatory cession from 20 per cent to 12.5 per cent in group health and group personal accident covers after facing high claims in health. Insurers have to mandatorily reinsure 10 per cent of the business with the national reinsurer.
GIC had seen an increase in the international market business on January 1, 2009 when European markets renew their treaty.
“Where GIC is the lead reinsurer, other reinsurers have to comply with the terms laid down by the national reinsurer. GIC has reduced commission rates depending on the experience with each player,” said ICICI Lombard Head Reinsurance Rajiv Kumaraswamy.
Despite of the decline in commission rates, insurance renewals of corporates have not hardened around April 1, 2009, when about 30 per cent of the renewals take place in India.
“Insurers will take a hit on their balance sheet if they don’t pass the increased rates on to their customers. But, in a detariffed situation and with cut-throat competition, insurers are not willing to pass it on to the corporate customers,” said Prudent Insurance Broker CEO Pavanjit Dhingra.
