Non-life insurers need to be prudent in underwriting risks: GIC
Quotes

Non-life insurers need to be prudent in underwriting risks: GIC

Last Updated: Saturday, August 18, 2012, 14:51
 
 Comment 1
 
Non-life insurers need to be prudent in underwriting risks: GIC
Chennai: Indian non-life insurers should be careful while underwriting risks as the non-life insurance market is on a high growth path and needs additional capital to support the business, a top official of General Insurance Corporation of India (GIC) said.

"The market is continuously losing substantial money by way of underwriting losses. It is now time for all concerned to pause and take stock whether it is prudent to continue this way," Ashok Kumar Roy, chairman-cum-managing director, told a news agency in an email.

He was referring to the underwriting losses (excess of claims over premium income) of the primary non-life insurers.

According to him, the high-growth profile of Indian non-life insurance market will need substantially higher capital to support the business.

"Therefore, preservation and growth of capital should be one of the top priorities for all players, In fact, there is no time to spare, waste," Roy said when asked about GIC writing to non-life insurers asking them to list out the action plan to make the obligatory reinsurance cession portfolio profitable.

According to Roy, portfolio reviews are on going activity done every year.

Reinsurance is an insurance protection taken by primary insurers with reinsurance companies. The primary insurers would claim from the reinsurers losses it had paid to its policy holders.

Reinsurers pay a commission to primary insurers for placing their reinsurance business with them. For some non-life insurers in India, this income will be sizeable as their risk retention rate is very low.

Obligatory cession is a specified percentage of reinsurance business that has to be placed by primary insurers with the national reinsuer so as to retain the flight of reinsurance premium out of the country.

In India, non-life insurers have to compulsorily place a minimum of 10 percent of their reinsurance business with GIC and is known as obligatory cession. According to Roy, the underwriting experience of GIC with regard to obligatory cession is a mixed bag.

"Overall we are losing money continuously for the past few years. The claims ratio in fire, marine (cargo and ship hull), health and motor classes of business is high," he said.

According to him, GIC does not have the option to decline payment of commission on the obligatory reinsurance cession made by primary insurers.

Industry officials told reporters that the national reinsurer has said that commission on loss making portfolio does not make business sense.

They said GIC may just accept the obligatory part and not additional business from a primary insurer.

GIC's Rs.2,469 crore loss last year was mainly due to its overseas portfolio, they added.

IANS



First Published: Saturday, August 18, 2012, 14:51


Comments


comments powered by Disqus
Audi TT Coupé
Audi TT Coupé
Shanghai Auto Show 2015
Shanghai Auto Show 2015
PM Narendra Modi in France
PM Narendra Modi in France
PM Modi`s Make in India push in Germany
PM Modi`s Make in India push in Germany
Renault Lodgy MPV
Renault Lodgy MPV

Web Wrap
Contact Us : Privacy Policy : Legal Disclaimer
Copyright © Zee Media Corporation Ltd. All rights reserved