Financial Daily from THE HINDU group of publications
Sunday, Dec 11, 2005
Financial Daily from THE HINDU group of publications Sunday, Dec 11, 2005 |
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Money & Banking
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General Insurance Industry & Economy - Natural Calamities General insurers plan `natural catastrophe' pool Radhika Menon
Mumbai , Dec. 10 GENERAL insurance companies have decided to create a `natural catastrophe pool' to cushion themselves against rising international reinsurance rates. The General Insurance Council has appointed a technical group to examine the feasibility of creating such a pool for the insurers. A `pool' is a fund created out of the commitments from insurance companies as per their individual exposure. In the case of claims, the pool reserves could be used to make payouts. Market forces would hence determine the size of the pool. A senior IRDA official confirmed the appointment of the technical group. "In the light of the recent spate of disasters, a pool was considered crucial," he said. The technical group consists of reinsurance experts from insurance companies. The group will submit a report that will in turn have to be approved by the CEOs of private general insurance companies through the General Insurance Council, said the official. The report is expected to be submitted by January and General Insurance Corporation of India will serve as the co-ordinator. According to analysts, the hurricanes in the US have lashed the global insurance industry with claims of over $40 billion. This has led to fears of hardening of reinsurance rates. The floods in Mumbai, Chennai and Bangalore and the earthquake in Jammu and Kashmir have also made dents in the balance sheets of the domestic insurance companies. The losses from the Mumbai flood itself were pegged at Rs 3,700 crore, the bulk of which was reinsured. In the aftermath of 9/11, even insurance companies in developed markets were not able to get terrorism covers. In India, insurance companies then put together what is called a "terrorism cover pool". Today, this pool can cover an indemnity of Rs 500 crore in any location. A senior official at a private general insurance company said that the purpose of the pool is to create capacity, particularly at a time when reinsurance support is not constant due to hurricanes or any other disaster. The official said, " Unlike the terrorism pool, which has a narrow range in terms of coverage, managing a natural catastrophe pool will be tougher given the volume of policies". A senior official at a PSU general insurance company said that the collection of data with respect to `exposure of risk' would have to be examined. Besides, the tax laws do not give concessions for catastrophic provisions, said the official.
More Stories on : General Insurance | Natural Calamities
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