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The Uttarakhand flash floods are likely to dent the profitability of general insurance companies in FY2014 as big ticket claims are expected from as many as 245 hydroelectric power stations, according to a senior industry official.
“A large number of hydroelectric power stations have been damaged in the Uttarakhand belt. About 245 projects overall have been damaged in that area. Many of the projects are very small,” said A.K. Roy, Chairman and Managing Director of the country’s sole reinsurance company, General Insurance Corporation.
New India Assurance, the country’s largest general insurance company has received 6 claims so far from hydro electric power stations such as state-owned National Hydroelectric Power Corporation (NHPC) and about Rs 10 crore worth of individual claims, said a senior company official.
During the Mumbai floods, the general insurance industry is estimated to have paid out claims of over Rs 4, 000 crore.
According to industry experts, the losses from Uttarakhand, which are still being ascertained, may be in a similar range.
The biggest losses for general insurers are expected to come from hydroelectric power projects and the motor insurance segment as many vehicles may have been washed away.
Under current regulations, the domestic general insurers — both public and private sector — mandatorily pass on at least 5 per cent of their premiums they collect to GIC Re for reinsuring their risks.
“We have already asked for information on the exposure of the general insurance companies in Uttarakhand. For larger claims, general insurers will have reinsurance. As a reinsurer, we are in a position to pay. But it will impact their results for the current year,” said Roy.
Catastrophe pool
The general insurance industry is also currently discussing the possibility of a natural catastrophe pool as a buffer against such natural calamities. This pool will have a structured compensation for people and for the property which is not insured.
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