As treaty renewals begin from April, reinsurance rates for insurers are set to decline. Reinsurers and reinsurance brokers said the fact there was no major natural catastrophe in 2012 would affect their books — premiums would be more stable; in some cases, these could even fall. A K Roy, chairman and managing director of General Insurance Corporation of India (GIC Re), said, “January renewals have just been completed. Except for marine-hull, the rates have either been flat or five per cent lower. The rates are expected to remain stable and there is no indication of these rising, since the catastrophe season is almost over.”
In the last five to six years, GIC Re has accumulated losses of Rs 4,500 crore. To reduce losses, the company has opted for sliding scale commission, through which one gets higher commission in case the performance is good and a lower amount in case of a weak performance. The company has also reduced its exposure to segments such as marine-hull, marine and, in some cases, property treaties.
It has also reduced exposure to the retro business in areas that consistently recorded losses.
Indian insurers believe this year, rates would stabilise. K K Mishra, chief executive of Tata AIG General Insurance, said reinsurers should consider the fact that, by and large, the Indian market was becoming profitable and professional. “Due to a better market and the good and profitable business seen in India in 2012, rates are not expected to rise,” he said.
‘Reinsurance Market Outlook-2013’, a recent report by Aon Benfield, a leading reinsurance intermediary and full-service capital advisor, said in peak zones, the demand for reinsurance continued to be flat or lower.
“Reinsurers are seeking to grow premiums by expanding in emerging markets and taking on large transactions that provide capital relief through new products such as longevity reinsurance,” said a report by reinsurer Swiss Re.
In 2012, premiums for reinsurance were raised about 10 per cent, owing to the losses reinsurers faced due to catastrophes such as the floods in Thailand and the earthquake in Japan. While renewal rates are expected to be stable, reinsurance brokers are anticipating a rise in premiums for catastrophe insurance.
A lead broker with an Indian reinsurer said this year, rates for the catastrophe segment would rise eight to 10 per cent due to the growing demand for these categories.
Aon Benfield’s Annual Global Climate and Catastrophe Report said in 2012, natural disasters in India, including floods (India and Bangladesh) and the Nilam cyclone (India and Sri Lanka) had resulted in a loss of Rs 1,517.1 crore.
