GIC, the sole official reinsurer in India has decided to jack up its premium for India Inc's catastrophic cover by 10-15%.
The catastrophic cover provided by general insurance companies are driven by reinsurance premium and any reinsurance premium hike by GIC will make the cover expensive for Indian companies. The total catastrophic cover market is estimated to be R400-500 crore in India.
Speaking to FE, Yogesh Lohiya, CMD of GIC, said, Yes, we have decided to hike our reinsurnace premium for catastrophic cover from April 1. The prices that we quoted before the Japanese calamities have been withdrawn. We are now quoting new prices for the industry.
According to Lohiya, due to a series of disasters in Asia-Pacific, there will be some hardening of the premiums, which has remained soft for a couple of years as there was over supply of capacity and there were no major insurance losses in the world.
As the CAT losses mount and the available capacity shrinks, the effect will be felt in all markets. Insurance is a business of spread, so the effect of Australia, New Zealand and Japan would impact India too. However, it would be nominal. It is still to be ascertained in what way the recent events in Japan will be impacting the market, he said.
GIC has around $12 million exposure in Japan. The situation is still being assessed in Japan, so it will take some more time to estimate and evaluate our exposure and claims there, Lohiya said. The complexity of the disaster is such that it will take considerable time to determine or approximate the amounts of losses, explained Lohiya.
However, even as the renewals for the Indian insurance industry begins on April 1, GIC is ready to provide support to the India market. And as far as our strategy for the Indian market is concerned it has always been one of support. We have always supported the Indian market through thick and thin, whether it was 2001, 2005 or now, he said.
On whether GIC expects any price improvement in certain segments which have hit the rock bottom in last few years, Lohiya said he is hopeful that things will look up on this front from now on.
There have been signs that the insurers will apply the right price to the various risks that come to them. The price war cannot continue for long, he said.