MUMBAI: National reinsurer General Insurance Corporation (GIC Re) has decided to bring down the cost of terror cover and has increased limits under the national terror insurance pool which it manages. Also, in a shift from its earlier stance, the terror pool would pay commission to insurance brokers to discourage them from placing business in the international market.
GIC will now offer cover up to Rs 1,500 crore, which is double the limit it was offering five years back. The rates have been lowered because there were not many major claims after the November 2008 terror attacks in Mumbai. “Overseas underwriters are undercutting us in terror insurance. But brokers are placing business overseas without verifying whether claims are likely to be paid,” said A K Roy, chairman, GIC.
He added that there was an incident where a large Indian business house’s terror insurance claims were not settled by an international underwriter despite losses following a Naxalite attack.
After the 9/11 attacks in 2001, terror has become an excluded risk from all insurance policies and international reinsurers had stopped covering any losses on account of terror attacks. To ensure continuity of cover, the Indian non-life industry set up a ‘terror insurance pool’ which would provide cover without recourse to international underwriters. Since then, the global market has opened up and rates have softened. To incentives brokers to place business in India, GIC has decided to offer commission to brokers who bring terror insurance business.
Speaking to newspersons at the inauguration of GIC HousingBSE 3.36 % Finance’s new head office in Mumbai, Roy said that GIC’s share of international business has increased to 50% from 45%. He added that the corporation was keen to diversify its business from various markets as this would add stability to the business.
Roy said that the corporation was on the lookout for an acquisition of a reinsurance company with Lloyd’s membership to get a foothold in the world’s largest reinsurance market. “We find that it is better to have business from across the world as, if there is problem in one market, there are other markets to make up,” said Roy.
As a part of a consortium of aviation underwriters, GIC has a share in most aviation claims. Roy said that GIC had a 3% share in the missing Malaysian Airline flight No. MH 370. “We will go by whatever decision is taken by the lead underwriter,” said Roy. According to news reports, German insurer Allianz was the main underwriter of the airline and has already started making payments on the claim.
Source: Economic Times