& #39;Reinsurance Rates Could Go Up By Another 10% & #39;

For Georg Koch, chief representative of reinsurer General Cologne Re, his four months in India have been hectic. First he was busy with setting up a liaison office in Mumbai, which was followed by action in the insurance market after the September 11 attacks in the US. He spoke to Business Standard about the fallout of the conflict in Afghanistan on the reinsurance market.

Excerpts.

What is the impact of the September 11 attacks and the Afghan conflict on your business?

In general, we would be tougher on renewal. We would sign new businesses only on better terms. At the moment, commission (paid by reinsurers to insurance underwriters) is high, which would be reduced when the covers come up for renewal. The commission paid depends on the loss ratio.

 

In case of fire business, it could be in the region of 42.5-45 per cent and I think it would go down to below 40 per cent at the time of renewal. In case of marine and miscellaneous, the commissions paid are different.

Have the reinsurance rates firmed up or will there be a further increase after the attacks on Afghanistan?

I expect a further increase in premium. It would be difficult to get a cover from an AAA-rated company like General Cologne Re unless the (reinsurance) premium is increased. We will ask for more and if it is not acceptable insurers can go to others.

What could be the quantum of increase?

It could be as much as 10 per cent in the case of non-life insurance.

What about your plans for India?

We have opened a liaison office in India. But a full-fledged entry would be depend on the development of the market. At the moment, the volume of business is too small.

Besides, there are also some legal issues involved. Then there are problems with regard to minimum paid-up capital, which at Rs 200 crore, is twice the sum for insurers and joint ventures.

There has been talk of creating an Asian reinsurance hub. How would it affect your business?

We have operations in Asia as well, and we would like to be part of it. But there has not been any formal proposal on this so far. To make the hub a viable proposition, there is a need for greater flexibility. But if it becomes a reality, it would be of great help to India and other countries in the region.

How would you rate the Indian insurance market?

Technically, it's a very sound market. There is a lot of understanding of the reinsurance business. Since it is a regulated market, a lot of products have not been explored so far. But as the market develops, new products would come in.