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C. Shivkumar

Bangalore , May 4

NON-LIFE insurers have sought Government intervention for capping third party liabilities in a bid to make the underwriting business viable.

Sources said that the capping of third party liability was sought as an alternative to hiking premiums. to limit claims ratios to manageable levels or below 100 per cent.

Currently claims ratios in motor third party risk covers are about 200 per cent. Insurers said that the Government and the insurance regulator had remained non-committal about allowing increase in premium. In fact premium hikes or loading is capped at 100 per cent.

The sources said that the current structure of premia for third party did not allow underwriting business to become profitable. Besides, since the liabilities could not be accurately estimated, none of the non-life insurers, both in the public and private sectors, is in a position to make provisions for unexpired risks. In fact, some of the insurers have in the past observed that the actual liabilities on motor third party losses were far in excess of their provisions for unexpired risks. Besides, the sources said, such anomalies also implied that none of them was in a position to obtain reinsurance cover from either the domestic or international reinsurance market. In the case of motor third party liabilities, the losses were unknown. Such a situation made estimation of the probable maximum loss ratios impossible. This is a critical ratio for obtaining reinsurance cover. In fact motor third party is the only portfolio not covered by reinsurance, either in the domestic or international markets. The sources said that this was also one of the major factors inhibiting the entry of private sector general insurers into offering motor third party liabilitiesThe sources said that such a situation was likely to exert pressure on the solvency margins of the PSU insurers and result in capital erosion.

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