General insurers turn cautious on El Nino threat

Last Updated: Monday, April 28, 2014 - 12:37

Mumbai: Fears of a possible El Nino threat to monsoon is likely to turn general insurers cautious in risk-taking, especially in the crop and weather insurance segments, according to industry officials.

"It`s not yet clear whether there will be an incidence of El Nino this year. However, if it happens, then insurers may turn cautious in taking some kind of risks, mainly in the weather and crop insurance segments," Tata AIG General Insurance chief executive KK Mishra told PTI.

He, however, said insurers would not raise premia in anticipation of El Nino. "Domestic firms will only react post-event."
There are conflicting views on the possibility of El Nino strike, which creates disturbance in monsoon causing scanty rainfall, with some foreign forecasters predicting such disturbance while domestic weather office denying it.

Another industry official said any such event can increase the premium for certain categories.

"One reason why premia have not risen in categories like property or crop insurance is that there was no major disaster in the country during the past two years. The impact of the Uttarakhand flash floods or cyclone `Phailin` in Orissa was not significant on the industry.

"But, an El Nino can push up rates," Bharti Axa General Insurance Managing Director and Chief Executive Amarnath Ananthanarayanan said.
Another industry expert said this can potentially impact the rural economy with adverse impact on the general insurance industry`s bid to penetrate the rural market.

Various brokerages have already cautioned investors on likely impact of the El Nino on the domestic economy saying companies whose revenues are partly tied to farm sector may see adverse impact.

If automobile and consumer durables companies are affected due to such weather disturbance, then it will have repercussions for the industry, industry officials feel.

PTI

First Published: Monday, April 28, 2014 - 12:37

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