The National Insurance Company (NIC) has earned a surplus of over Rs 90 crore in reinsurance operations in 1997-98 by retaining a high percentage of the premium income in the domestic market. Its surplus in the previous year stood at a mere Rs 2 crore.
Out of a total premium of Rs 1,636.54 crore, Rs 1,264 crore had been retained by this arm of General Insurance Corporation (GIC) in the eastern zone. NIC had, therefore, reinsured only 22.9 pre cent of its premium income with GIC, its other subsidiaries and overseas reinsurance companies.
The reinsurance experience further shows that NIC has paid overseas companies Rs 52 crore or 3.2 per cent of its total premium income.GIC, which received Rs 320 crore from NIC under the reinsurance heading, paid out to some overseas companies a portion of the amount. For GIC, it has been an act of reinsurance of the reinsured products of NIC.
NIC generally retains around 78-80 per cent of its total premium income and only a little over 20 per cent is paid out for reinsurance.
GIC and four of its subsidiaries retain a high percentage of the premium income. This goes up to as high as 87-88 per cent of the total premium income under general insurance industry. In 1996-97 the total outgo from the industry under reinsurance stood at 87 per cent of the premium income. This is considered high by international standards.
NIC had incurred underwriting loss of Rs 92.8 crore in 1997-98 which, however, was way below the Rs 138.6-crore loss suffered in the previous year. The underwriting loss was primarily because of the third party motor insurance scheme. The company's loss under third party motor insurance went up to 240 per cent in the previous fiscal.
But, the underwriting experience enabled NIC to escape losses on many counts. Reinsurance operations have shown not only a surplus but also a big jump in the range of surplus. This added up to the company's balance sheet.
