Hudhud & Other Disasters Make Landfall at Insurers

Cyclone Hudhud and cyclone Nilofar are likely to contribute to insurance claims of over `. 5,000 crore, making the current fiscal year possibly the worst in a decade for general insurers that have also taken a hit from the floods in Jammu & Kashmir.

The industry’s hopes of turning in a profit this year after increasing premiums for retail categories such as automobile and health may not materialise due to these natural calamities, several executives said. Cyclone Hudhud, which hit the coast of Odisha and Andhra Pradesh, resulted in total claims of .

`4,000 crore, including crop and industrial claims.

Cyclone Nilofar is expected to hit north-west Gujarat soon with equal severity.

RMS modelling agency has pegged the insured loss from cyclone Hudhud at .

`2,400 crore, estimating with the help of catastrophe models that map the risk landscape, quantifying the impacts of natural and manmade catastrophes for the global insurance and reinsurance industry. “This is the first time cyclone has hit the industrial belt. The two cyclones are going to jeopardise insurance companies and hopefully stop freefall of prices,” said AK Roy, chairman & managing director of national reinsurer General Insurance Corporation.

In the absence of claims for the past few years, the general insurance industry had been offering huge discounts on corporate policies. The underwrit ing losses of non-life insurance industry reduced 20.88% to .

`6,984 crore in 2012-13 over the previous year due to reduction in percentage of claims incurred, as per the latest report by the Insurance Regulatory & Development Authority.

Cyclone Hudhud damaged crops worth .

`1,500 crore, about the same amount for which insurers had to settle claims last year in the wake of cyclone Phailin. The large claim notwithstanding, the industry did not revise the premium on crop insurance.

“Price correction is overdue,” said Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance. “We have always believed in pricing products appropriately.” After the deregulation in 2007, insurers have been undercutting each other in most lines of business. Experts say insurers need to invest in actuarial capabilities to underwrite risk and price it accordingly while the companies are focusing on grabbing market share even at a cost that could wipe them out.

Source : Economic Times

Date : 30-10-2014

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