General insurance premiums may not go up this year

General insurance premiums are unlikely to see a sharp rise this year due to falling global reinsurance rates.

According to industry experts, reinsurance premium rates are expected to decline this year as there have been no major catastrophes globally and also due to overcapacity in terms of capital in the market. This is despite India recording high economic losses due to the Chennai floods, which had a ₹3,000-crore impact on the general insurance industry.

According to Aon Benfield, leading treaty reinsurance broker, for 2015 global reinsurance capacity was about $565 billion, with alternative capital making up about 12 per cent — or $69 billion — of that total.

Insurers apportion a part of their risk to re-insurers by sharing a slice of their business (premium) with the latter so that they don’t have to bear the entire loss in case of an adverse event.

K Sanath Kumar, Chairman and Managing Director of General Insurance Corporation, the country’s sole domestic re-insurer, said reinsurance rates would remain soft this year as the last year had been benign in terms of major catastrophes globally. This could lead to a decline in rates when the reinsurance contracts for Indian general insurers come up for renewals in April.

G Srinivasan, Chairman and Managing Director of New India Assurance, the country’s largest domestic general insurer, also said that he does not anticipate a hardening in reinsurance rates despite high catastrophe losses in the Indian market. This is due to the fall in re-insurance rates globally.

Global reinsurance broker, Willis Re, in its recent report, said: “Reinsurers have also faced difficult renewal dynamics in some specialty markets, with large losses and reductions in original rates not proving sufficient to dissuade further capacity from entering either the aviation or energy markets. This is leading to a prolongation of softening rates.”

COMMENT NOW