Financial Daily from THE HINDU group of publications
Wednesday, Oct 19, 2005
Financial Daily from THE HINDU group of publications Wednesday, Oct 19, 2005 |
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Money & Banking
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General Insurance Industry & Economy - Natural Calamities Spate of natural calamities turns worrisome — Insurers to scale up CAT cover Sarbajeet K. Sen
New Delhi , Oct 18 MOUNTING losses due to natural disasters appear to be forcing insurers to scamper for cover. The series of natural calamities that rocked the country during the year has not just the insurable public worried, but also insurance companies which are contemplating a major hike in the catastrophe reinsurance. In what could signal a trend in the non-life insurance industry, one of the leaders of the pack - Oriental Insurance Co - is considering near doubling of the protection under the catastrophe reinsurance policy (CAT cover) to guard against future losses due to natural disasters. "The frequency of natural disasters this year and the losses on account of them have set us thinking. We are considering a gradual increase in the protection that we have under the CAT reinsurance policy. We could seek to double our cover in the days to come," the Chairman and Managing Director, Oriental Insurance Co, Mr M. Ramadoss, told Business Line. He said that the present CAT cover for Oriental Insurance that stood at Rs 250 crore could be gradually scaled up to Rs 500 crore in the near future. The major disasters in the recent past started with the Asian tsunami on December 26, 2004 and continued into 2005 with floods in Gujarat, followed by the losses caused by rains in Maharashtra including Mumbai. Royal Sundaram CAT cover: Mr Antony Jacob, Managing Director, Royal Sundaram Alliance Insurance Co said that the recent floods had tested the abilities of companies to withstand losses. "The recent flood loss was an acid test for the adequacy of CAT cover purchased by an insurer in the Indian market," Mr Jacob said. He said that though Royal Sundaram's CAT programme was triggered off due to the flood losses, the company was adequately covered. "Royal Sundaram has adopted a prudent and conservative approach towards underwriting and risk management. The present cover was sufficient to take care of our net exposure," he said. The CAT cover, that is taken from the national reinsurer - the General Insurance Corporation of Indian (GIC) and other global reinsurance companies, come up for renewal at the beginning of each calendar year along with other reinsurance protection. Mr Jacob said that the CAT programme of an insurer gets triggered off when the net loss on account of a catastrophe or on account of a single event affecting more than one risk exceeds the level of the company's loss retention.
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