The Hindu Business Line : Infosys places Rs 4,600-cr cover with NIC

INFOSYS Technologies Ltd has placed its risk cover with the public sector National Insurance Company of India Ltd (NIC) for a sum assured of close to Rs 4,600 crore or over $1 billion.

Sources at Infosys said that the company paid an estimated premium of about Rs 10 crore. This was likely to increase as the company was in an "expansion mode," the sources added. The risk cover comprised a business interruption cover and a group medical cover for an estimated 24,000 families, industry sources said.

This is for the second year in succession that public sector NICL has bagged the prestigious account. NICL will be the lead insurer having an estimated share of 80 per cent of the risk cover, while the remaining 20 per cent would be by ICICI Lombard General Insurance Company Ltd.

Last year, NIC's co-insurers included both ICICI Lombard and Bajaj Allianz, on a 60:25:15 basis.

The business interruption cover for Rs 4,600 crore included both fire and loss of profit, the sources said. The sum assured for fire losses was pegged at around Rs 2,200 crore. The loss of profits cover was about Rs 2,400 crore. This is among the largest risk covers taken by corporate India.

Sources said that close to 70 per cent of the company's assets covered were in Bangalore. The risk coverage of the remaining assets in other parts of the country was minimal, they added.

They said that NIC insurers had taken full reinsurance support for the cover to restrict their own liabilities. Under the present guidelines of the Insurance Regulatory and Development Authority, 20 per cent of the reinsurance is to be ceded to the national re-insurer General Insurance Corporation (GIC). Global re-insurers have covered the remaining component of the asset risk. Infosys was able to obtain a highly competitive premium for the large sum assured, the sources said.

The premium paid out by Infosys included cover for both business interruption as well for group medical claims. This was despite the fact that Infosys had a high claims ratio on the group medical cover. The claims ratio in the Infosys medical cover was in excess of 100 per cent. This was in line with the trend in mediclaim covers, where claims ratio continues to remain on the higher side. The high ratios implied that the medical covers were actually loss-making for the insurers. But the losses on this count were cross-subsidised by the business interruption cover.

The cross subsidisation not withstanding, the sources said, the Infosys account was still highly profitable for the general insurers in the country. This was in view of the low claims ratio in asset risk covers. Infosys has made no claims so far on asset risks.

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