Global catastrophes hit GIC Re
Insurer set to take a hit of Rs 1,500 crore in claims, its highest ever; Japan alone accounts for over 60%.
General Insurance Corporation of India (GIC Re), the designated national reinsurer, is set to take a hit of Rs 1,500 crore on its balance sheet due to catastrophes in various parts of the world.
The claims, the highest in the history of the reinsurer, will surpass claims of Rs 650-750 crore from the Mumbai floods of 2005.
“The net loss to the company on account of the three catastrophes put together would be around Rs 1,500 crore. But we have enough cover in terms of reserves to deal with it,” said Yogesh Lohiya, GIC Re chairman.
| DISASTER COVER |
| * Total claims from Japan, Australia and New Zealand at Rs 1,500 crore |
| * Claims from Japan alone pegged at Rs 1,000-1,200 crore |
| * Highest claim before this was Rs 650-750 crore on Mumbai floods in 2005 |
| * Profitability to take a hit in FY12 |
| * Sees global reinsurance rates rising 25-30% |
Of the Rs 1,500 crore, Rs 1,000-1,200 crore is estimated to be on account of the Japan catastrophe. Consequently, the profitability would take a hit this financial year, admitted Lohiya.
This year has been the worst in terms of claims due to global catastrophes. In March, Japan was struck by a combination of earthquake and tsunami, leading to outbreak of fire at its nuclear plants in Fukushima, which lasted for close to two weeks. The total economic loss was pegged at $409 billion by global reinsurers.
Before that, there was an earthquake in Christchurch, New Zealand, and floods in Australia, where the total economic loss was pegged at over $50 billion.
Global bigwigs in the reinsurance sector, such as Munich Re, Swiss Re and Lloyds, have taken substantial hit from casualties of these catastrophes. GIC Re generally enters into treaties with global reinsurance companies while taking exposure overseas.
Insurance players, after underwriting a risk, retain a part of it (based on the retention limit), while the rest of risk is ceded or transferred to reinsurance players against a premium.
The current losses have led GIC Re to become more cautious about its overseas treaties. “We have been cautious about underwriting the risks. We have also reduced the loss limits on various risks,” he said. Even global reinsurance rates have hardened by 25-30 per cent, following the catastrophes.
“Renewals for Indian corporates will happen from April, so it’s still early to comment on the rates. But globally, the rates have seen an increase of 25-30 per cent on renewals,” he said.
While GIC Re was expecting premiums of Rs 12,000 crore in 2011-12, the record claims would reduce its profitability, said Lohiya.
For 2010-11, GIC Re reported a net profit of Rs 1,033.4 crore, while net premium stood at Rs 10,512.6 crore. The overseas business contributed 40.3 per cent to the total premium. Net worth stood at Rs 9,820 crore, while total free reserves were pegged at Rs 9,390 crore.