Gic Angles For Buffer In Japan, Middle East

The General Insurance Corporation of India (GIC), the designated national reinsurer, intends to place its insurance business in the Middle East, Japan and Africa in order to insulate itself against the rising insurance premium costs in the London reinsurance market.

GIC intends to minimise the impact of the September 11 attacks by placing reinsurance in these markets as premiums in the London market has sky-rocketed by 300 to 400 per cent. Till date, the company used to reinsure mostly with the London market.

Meanwhile, the common man continues to be insulated against the impact of the attacks as most of the insurance products fall under the tariff regime. Non-tariff products can expect to cost more in the days to come.

On the other hand, tariff items including fire, property, and auto insurance covers continue to enjoy administrative rates. "Until the Tariff Advisory Committee (TAC) decides to increase the rates, premiums on tariff products cannot increase, especially in the face of competition from private players," said an official with a public sector insurance firm.

GIC will start discussions with the Indian insurance players to reach a consensus on reinsuring the programme in other markets -- the Middle East, Japan and Africa. "We need to come to mutually agreeable solutions in order to minimise the impact of rising premium costs," said a GIC official.

Rates in the London market are exceptionally high as many insurance and reinsurance companies have taken a major hit and have to recoup themselves. Moreover, the political situation continues to be uncertain following the US retaliation on Afghanistan, said the official.

There is increasing pressure for greater co-operation among insurance companies in the country to maximise the domestic retention. GIC is trying to encourage this move to retain the cost of insurance in the country, said insurance sources.

Globally this has been regarded as a major solution to the rising premium costs, said a reinsurer broker. "During the soft market, insurers bought protection on the basis that it was cheap, rather than because they needed it. As the price of reinsurance rises, they are likely to become more discerning and retain a higher proportion of risk," he added.