Government on Tuesday said it was examining the way in which General Insurance Corporation (GIC) entered into an arrangement with US-based Berkshire Group and subsequent cancellation in a short period, after a payment of $15.2 million premium towards reinsurance business cover. GIC had entered in arrangement with National Indemnity (Berkshire Hathaway) through broker K M Dastur in August 2012 for pure retrocession (reinsurance) business, but cancelled it on December 5.
Finance Minister P Chidambaram said GIC said unprecedented catastrophes in 2011 contributed to huge losses for the company. It was accordingly decided by GIC to accept pure retrocession business from international reinsurance firm, only after obtaining adequate protection cover.
For procuring the specialised product, it was decided to engaged brokers based on their global presence, experience in pure retrocession line of business, and ability to bring international quotations for such a highly technical cover. Consequently two brokers, K M Dastur and J B Boda were tasked to approach the global reinsurance market.
"Looking into the very limited market for such a cover, only one offer from National Indemnity (Berkshire Hathaway), US, could be arranged through K M Dastur and the same was accepted wef August 13, 2012," Chidambaram informed. GIC is engaged in doing reinsurance business both within and outside India. Businesses form outside India include accepting reinsurance business from the global reinsurance companies which is termed as pure retrocession business.
