Indian insurers are taking catastrophe cover into their own hands.
Less than a month after India's Insurance Regulatory and Development Authority rejected the idea of developing a catastrophe pool for India saying the country's insurance industry had sufficient cushion to absorb shocks and large claims, two top insurers have mooted upping their catastrophe covers.
The series of natural calamities this year has had insurance companies in both the public and private sectors contemplating a major hike in catastrophe reinsurance. In what could signal a new trend in the non-life insurance industry, the government-owned Oriental Insurance Company is looking at nearly doubling the protection under its cat cover. This would help it guard against future losses due to natural disasters of which there has been a string in recent months – the tsunami disaster on 26 December 2004, severe flooding in Gujarat, the Mumbai floods on 26 July this year and, most recently, the earthquake in Indian and Pakistan-occupied Kashmir.
“The frequency of natural disasters this year, and the losses on account of them, has set us thinking,” said Oriental Insurance's chairman and managing director M Ramadoss. “We are considering a gradual increase in the protection of Rs2.50bn ($55.7m) that we have under the cat reinsurance policy, to double its present level.”
Meanwhile, Antony Jacob, managing director of Royal Sundaram Alliance General Insurance said, “the Mumbai flood setback was the acid test for the adequacy of cat cover purchased by an insurer in the Indian market. Actually, the cat programme of an insurer gets triggered when the net loss on account of a natural disaster, or on account of a single event affecting more than one risk, exceeds the level of the company's loss retention.”
Any cat cover that is taken from the national reinsurer, General Insurance Corporation of India (GIC), and other global reinsurance companies, comes up for renewal at the beginning of each calendar year, along with other reinsurance protection.