Money & Banking

GIC Re hikes rates of fire premium

Surabhi Mumbai | Updated on January 27, 2020 Published on January 27, 2020

Will impact average premium by 25%

State-owned re-insurer General Insurance Corporation of India (GIC Re) has hiked the fire premium rates for all 291 occupancies (occupancy = purpose for which a building is being used) from January 1 this year, which will increase the premium on an average by about 25 per cent across all occupancies.

“There is some increase in fire premium rates. Indian Insurance Bureau (IIB), which is an independent body under IRDAI , had come out with loss costs (burn costs) for 291 occupancies under the fire class of business in November 2019,” Reena Bhatnagar, GM (Property), GIC Re, told BusinessLine.

These burn costs are based on five-year claims data collected from all cedents in the market, she said, adding that these costs do not include management expenses or profit margin.

A cedent passes financial obligation for potential losses to an insurer in return for an insurance premium .

“GIC has introduced an endorsement to all fire treaties in the market effective January 1, mandating the IIB loss costs will be the minimum rates at which risks can be covered,” she said. Insurers said though there will be some increase in the premium rate in the market, the move by GIC Re was long pending as the rates were low.

“The rate increases, which are minimum rates, will make the fire portfolio more sustainable going forward,” said Sanjay Datta, Chief–underwriting and claims, ICICI Lombard General Insurance.

After offering discounts for more than a decade, GIC Re hiked the premium for eight sectors last March, including thermal power plants, textiles, pharma and steel in line with their claims history.

“This resulted in significant increase in premium rates for some sectors and clients, for risks which are ceded to the treaties with GIC Re,” it had said at the time, adding that the move was aimed at correcting the imbalance between the premium rating and claims history over a number of years.

The correction is premised on the loss data (burning cost method) compiled by industry body IIB, it had noted.

Published on January 27, 2020
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