The global reinsurers are thinking to impose a limit on the maximum liability that non-life insurers can claim for a catastrophe as a result of huge claims from natural calamities in Japan, Thailand and Australia last year. GIC Re the indian reinsurer is also planning to put a cap on catastrophe insurance limit.
“Reinsurers want to put a limit on maximum liability that is payable in terms of large claims,” said KG Krishnamoorthy Rao, managing director and CEO, Future Generali General Insurance.”Insurers will end up paying more to reinsurers. This result will increase the premium rates,” Rao said. Indian insurance companies have to mandatorily reinsure 10% of their risk with GIC.
Liability limits for natural disasters would be around 2-5 times its treaty limit, said people familiar with the issue. Treaty limit is decided by insurer and the reinsurer for every reinsurance contract. The reinsurer then covers all the insurance policies coming within the scope of that contract, within the treaty limit.
The move, which comes ahead of mandatory placement of reinsurance programme review by insurers with regulator Insurance Regulatory and Development Authority before February 15, could lead to a spurt in premium rates on insurance covers.
“This is the first time reinsurers are insisting on event limit in India,” said Gaurav Garg, MD and CEO, Tata AIG General Insurance Co. GIC took a hit of more than Rs 1,500 crore in 2011 due to natural disasters in Japan, Thailand, Australia and New Zealand