The Indian economy may be witnessing a deflationary situation at present, where pricing of a commodity dips significantly. However, Indian corporates, which are renewing their insurance covers from April 1 will have to pay more premium for the same cover.

A majority of the general insurance business from corporate clients are renewed on April 1.

Last year, when full detariffing was implemented, the insurance premium for the traditional corporate covers including fire and property, which constitute a majority of the domestic general insurance industry, had fallen almost 80-90%.

This was because cut-throat competition among the domestic general insurers was rampant; the companies were seeking to expand their top line growth.

However, thanks to changing economic and financial conditions, reinsurers–GIC Re as welkl as other major reinsurers Swiss Re and Munich Re– are refusing provide support like last year.

They are now demanding a hike in premiums from general insurers.

Sources point out that GIC Re has reduced its reinsurance commission for general insurers, which contribute to their balance sheet in a major way.

Sources say reinsurers like Swiss Re and Munich Re, which have suffered losses due to the global financial crisis have also cut down their exposures to the Indian market substantially.

?General insurers, for the first time, have approached a lot of new international reinsurers for getting reinsurance covers. Some of these reinsurers are not of good quality,? say industry experts, adding that top line reinsurance companies like Swiss Re and Munich Re are no longer enthusiastic on India. They have not participated in proportional treaties.

Other reinsurers like SCOR, Allianz Re and Hannover Re have, instead, participated in Indian renewals.

Rakesh Jain, director, corporate, ICICI Lombard General Insurance, while speaking to FE, said, ?I do agree that the premiums have gone up, though marginally. The reason is that there is a strong push for improving the risk features by increasing deductibles, which should commensurate in better risk pricing of my company. Also, the extent of discounts in premiums has hardened a little bit. Thus, the discount percentages are slowly reducing. Reinsurance commissions have come down slightly.?

?We have major support from GIC Re. Swiss Re and Munich Re are also players in my company?s case, but to a small extent. As they are impacted by the global meltdown, their support to us may fall. But, with a partial participation, I don?t think their falling support will have any impact on the company,? said Jain. ICICI Lombard General Insurance is the number one private sector general insurance company in the country.

George Kurien, chief financial officer, Bharti AXA General Insurance, said that the market is very competitive and prices are being discounted substantially.

?We may feel the heat in the short term. But, we expect prices to improve in the medium term. Reinsurance prices have not hardened despite the low prices and heavy discounting,? he said.

?GIC Re provides the major support; Swiss Re and Munich Re are present in the form of follow-shares only in our case,? said Kurien.

Crunching numbers

•Majority of the general insurance business from corporate clients are renewed on Apr 1

• Last year, premiums fell 80-90%

• Now, reinsurers are demanding a hike in premiums from general insurers

• GIC Re has reduced its reinsurance commission for general insurers

• Swiss Re and Munich Re have also cut their exposure to the Indian market substantially