Pandemic will help insurance penetration in long run: GIC Re Chairman

GIC Re Chairman-cum-Managing Director Devesh Srivastava has recently stated that despite its challenges the COVID-19 pandemic has increased awareness about insurance products and will help penetration in the long run.

Speaking in an interview Srivastava discussed the impact of the coronavirus crisis over the past year, as well as the future outlook for the Indian re/insurance market. Addressing the impact of the pandemic on this market, Srivastava stated that the claims burden has not been significant, but noted that the industry has instead been hit by a reduction in demand from other classes of business due to lockdown measures.

“Pandemic losses from property and casualty classes have not been significant,” he explained. “As Indian insurance covers Business Interruption only if there is a Material Damage loss, losses form the business interruptions have not been triggered. Further pandemic exclusion is already present for all property class of business.”

Regarding the response to the pandemic by reinsurers and the possibility of public-private solutions, Srivastava further warned that the state must be willing to take on considerable financial responsibility if such measures are to succeed.

“Pandemic risks are difficult to price as the loss potential from such kind of events can be drastic from accumulations,” he remarked. “Uncontrolled exposures could lead to a situation wherein an insurance or reinsurance company could become insolvent. Setting up of pandemic pools, especially with State or government backing can be conducted only if there is significant outlay to the pool by the State. The feasibility of a pandemic pool by only insurance and reinsurance capacity within a country could be a difficult task.”