 "New insurance rules may not help private players")
Reinsurance rates for the next fiscal could see an average of 10% hike with an increase in losses in segments like motor and property from financial year 2016-17 onwards. The recent Chennai floods had led to heavy losses for insurers to the tune of Rs 5,000 crore.
Alice Vaidyan, chairman and managing director of General Insurance Corporation of India (GIC), the sole domestic reinsurer of the country said that final discussions are on on the treaty renewals which will be completed by April. She added that several sectors have seen losses and hence they have advised an upward revision in rates. GIC Re had losses of Rs 1000 crore from Chennai floods but they were adequately protected.
For the last few years, reinsurance rates have remained more or less flat since insured losses were not very high in the country from natural calamities or other incidents. However, in the wake of a rise in the number of incidents in this segment such as floods and earthquakes in the past two years, premiums paid by customers for general insurance products under the natural catastrophe segment could see a rise.
In 2015, rates were flat, because no major catastrophic event impacted the books of companies in 2015-2015, some segments such as aviation are expected to see some marginal impact.
Reinsurance and insurance officials had said that the Asian market had been mostly free of such events, barring the Jammu & Kashmir flash floods and the Hudhud cyclone, which had a slight impact on the rates. The Hudhud cyclone, which hit Andhra Pradesh and Odisha, resulted in Rs 3,000-3,200 crore of claims for property and crop damage, while the floods in Jammu & Kashmir saw insurers taking a Rs 3,000-crore hit.
Reinsurance is the insurance taken by insurance companies to mitigate the risks of claims and claim payment brought about by large risks. Here, the reinsurer takes on all or part of the risk covered under a policy of an insurance company in consideration of a premium payment.
Contracts in reinsurance come for renewal on an annual basis. Last year witnessed softening of reinsurance rates in the contracts renewed. According to sources, the rates came down by 15-20%. This was because of absence of major natural catastrophe events across the world and better numbers reported by the sector. Market expansion is also expected, with the insurance ordinance ruling that foreign reinsurers can open branches in India to offer better services.
Reinsurance rates are decided based on domestic as well as global events. A single or group of events happening in a particular country might or might not affect the rates, but a large global catastrophe could impact rates since the reinsurers would have an exposure to those risks.
