The Hindu Business Line : Mumbai terror strike costs insurers Rs 1,400 cr

Terrorism Pool helps: Mr M. Ramadoss, Chairman and Managing Director, Oriental Insurance addressing at a press conference in Bangalore on Wednesday. –

Our Bureau

Bangalore, Dec. 10 Terrorist strikes on Mumbai’s Taj and Oberoi-Trident hotels have dented insurance companies’ balance sheets by Rs 1,400 crore.

Speaking to reporters here on Wednesday, Oriental Insurance Company Ltd’s Chairman and Managing director, Mr M. Ramadoss, said, “The losses will be partly covered by the Terrorism Pool.”

Both public and private sector insurers are contributors to the pool created as a risk mitigation mechanism. The losses to be covered includ both property and liabilities that cover loss of profits due to shutdown in the operations of three luxury hotels targeted by terrorists late last month.

Each insurer’s claims liability would be at least Rs 200 crore. Mr Ramadoss said that OICL’s share was unlikely to exceed 18 per cent. The effective liability would be far less as all the insurers had further reinsured their liabilities, he added.

He, however, added that the Terrorism Pool covered only property. For third-party liabilities, the losses were still in the process of being worked out, he added. OICL in the meanwhile had already settled some claims from the Maharastra State Police department. At least 11 claims have already been settled, he added.

Slowdown in growth

This year, insurers were faced with a slowdown in business growth. Business growth this year was unlikely to exceed 9 per cent, for the entire industry, said Mr Ramadoss, who is also chairman of the General Insurers Public Sector Association. Further, insurers were also affected by a sharp increase in Marked-to-Market losses on account of the drop in the value of their equity holdings.

PSU insurers’ equity holdings were valued at Rs 13,500 crore at the end of the last financial year. They were down to Rs 11,000 crore in September. However, for the PSU insurers, “the losses were only notional.” Mr M Ramadoss explained that this was because the cost of acquisition of the equities was about Rs 5,800 crore. There was little impact on the solvency ratio that is currently about two times the insured liabilities.

Mean yield target

Mr Ramadoss also said OICL targeted mean yield is 9.5 per cent, indicating improving returns on its investments. For the last financial year, the mean yield was only 8.57 per cent. This year, OICL was able to earn high returns on bulk deposits with the banks.

Insurers are among the largest bulk depositors. On the core business, OICL was concentrating on cutting the underwriting losses. Underwriting losses are currently about 121 per cent of the premiums. This year, the target was to bring it down to 118 per cent.

The PSU insurer was also leveraging its core insurance solutions platform for setting up service centres. These centres would focus on settling claims within two weeks, instead of the 70-80 days in the past.

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