Reinsurance support from Hiscox Plc of UK
The productbeing offered is an errors and omissions risk cover.
Premiums onthe product will not be uniform; tariffs are likely to be client specific.
Bangalore, Oct. 12
IFFCO-TOKIO General Insurance Company Ltd (ITGICL) has entered into treaty arrangements with specialist underwriter Hiscox Plc of United Kingdom for providing risk cover to the information technology and IT enabled services sectors in the country.
Speaking to reporters on the tie-up for providing errors and omissions cover to the IT sector, The ITGICL Managing director and Chief Executive officer, Mr Ajit Narain, said that the arrangement would lead to Hiscox providing reinsurance support of a maximum liability of up to $30 million. Hiscox is one of the world's leading technology underwriters specialising in technology liability.
"Ceding of risks up to this limit will be automatic," Mr Narain said. However, beyond this amount, it would be done on a facultative basis, he added. Facultative basis implies that reinsurer has the right to accept or reject covers beyond this limit. IFFCO-Tokio is joint venture between IFFCO and the Tokio Marine and Fire Insurance Company of Japan.
The product being offered is an errors and omissions risk cover, targeted exclusively at the software sector. This product covers litigation risks of vendors. As Indian technology companies get greater global exposure, they also face litigation from customers, Mr Narain said. This cover is intended to mitigate these risks. Premiums on the product would not be uniform. Tariffs would be client specific, he added.
Referring to the company's progress, he said, till September, ITGICL's gross premium accretions are Rs 655 crore, up 53 per cent over the corresponding period of the last financial year. Average claims are about 65 per cent, Mr Narain said.
But, he said, there are no solvency pressures. The current capital is more than enough to support the solvency of the company, he explained. ITGICL is currently capitalised at Rs 220 crore. "The partners are prepared to bring in more capital if required," he said.
Referring to the impact of tariff deregulation, he disagreed that premiums would drop due to intense competition. Instead, he said, some sectors that are loss making would actually see an increase in tariffs.
It is in the low loss sectors that some correction in pricing is expected, he added. He said that they are fully prepared for the free pricing regime, since they have already built up five-year database.