Llyod's for fair and business-friendly regulations

MUMBAI: As the insurance regulator IRDAI is preparing regulations to facilitate the entry of global re-insurers in the Indian market, Lloyd's has pitched for fair and business-friendly regulations for the industry.

Lloyd's, which is planning to set up operations in India, feels there is a need for prudential, proportional regulation supporting well capitalised re-insurers.

"We also regulate the Lloyd's markets consisting of large syndicates and not only our regulations are tough, but also we operate in many global markets, having strong yet business-friendly regulations. There should be no place for bureaucratic hurdles or over-regulations blocking business development," Lloyd's chairman John Nelson said in statement.

Describing the current non-life market in the country as highly competitive one where low margin or negative returns prevail, Nelson said, "It is an under-penetrated market and we would act as a specialist insurer which has a huge potential in the country.

"We are very pleased that the Insurance Bill with Lloyd's chapter has been passed by the Indian Parliament, which will increase insurance penetration. It will aid growth of economy and help diversify some of the major risks out of country."

He expected several members of Lloyd's to set up base in the country over time, and confirmed that Lloyd's is in discussions with IRDAI on the modalities of Lloyd's entry.

There is no clarity yet on where Lloyd's branch will be established or how many syndicates will co-locate with it to India to begin with, Nelson said.

However he hinted that Indian operation will be on the similar pattern as Lloyd's Singapore operations where it has 18 syndicates underwriting the Asian business.

The Singapore operations gives Lloyd's an underwriting base to access both local and regional insurance and regional business.



India: Insurers disappointed by 'moderate' premium hikes for 3rd party auto

The insurance regulator has approved 'moderate' increases in compulsory third-party motor insurance premiums, to the disappointment of several auto insurers.

The Insurance Regulatory and Development Authority of India increased the premium rate by 14-15% for the financial year which started on 1 April, a level which is much lower than the 40-50% expected by the industry, reported The Economic Times.

The increase is also lower than that envisaged by IRDAI in its own draft report last month in which it had proposed a hike in the range of 14-108%. Third-party motor is the only business in the non-life insurance industry whose tariff is fixed by the IRDAI.

General insurers feel that the moderate hike would not ease mounting losses in the portfolio. At present, the insurers have on average a loss ratio of 140-150% in this class of business.Some of them may raise  premiums in other classes of business to compensate for the lower than expected increase.

Tata AIG General Insurance Chief Executive, Mr K K Mishra, told Press Trust of India, that in the long run,  losses in the third-party motor portfolio will strain the underwriting health of the industry.

 

http://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/32467/Type/eDaily?utm_source/Edaily-News-Letter/utm_medium/Group-Email/utm_campaign/Edaily-NewsLetter

India: Non-life insurers unprepared for IPOs

While some private-sector life insurance companies are gearing up for initial public offerings (IPOs), non-life insurers are less ready to tap the stock market for funds.

Huge underwriting losses affecting their valuations, and stiff opposition from staff unions in the case of the state-owned general insurers, are the main reasons holding back IPO plans for non-life insurers. It is expected that the valuations of general insurance companies will be less than half that of life insurers, because of claims that exceed premiums collected in some key lines of business, like motor insurance, reported Business Standard.

"Motor third-party and corporate health have seen heavy losses, because the claims incurred are much higher than the premiums collected. The books would first have to be cleared of these before  the insurers approach the regulators (Securities and Exchange Board of India and the Insurance Regulatory and Development Authority of India) with a listing proposal. Otherwise, they would not be able to sustain their return to shareholders," said the head of insurance business in a large accounting firm.

The net incurred claim ratio of general insurers is 81.9% for the financial year ended 31 March 2014, with this ratio exceeding 100% for motor third-party and aviation insurance.

"The insurers would be in a better position for an IPO after two or three years, when the overall industry improves, from an underwriting perspective," said Mr Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services.

The new insurance law passed by Parliament this month paves the way for the public listing of the four state-owned general insurers. However, no decision or timeline has been decided for the listing of these entities. Their employee unions, meanwhile, are opposed to the insurers being listed.

http://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/32404/Type/eDaily?utm_source/Edaily-News-Letter/utm_medium/Group-Email/utm_campaign/Edaily-NewsLetter

India: Auto insurance sector in state of flux

Several changes are afoot in the auto insurance sector in which losses are expected to be steeper beginning in the new financial year starting on 1 April. The insurance regulator will make it mandatory for insurers to underwrite a minimum percentage of motor third-party (TP) business, so that there would be no supply-side constraints in the market. At the same time, insurers want to raise the barrier for mandatory independent damage surveys.

The Insurance Regulatory and Development Authority of India (IRDAI) has said that every insurer, during a financial year, shall underwrite a minimum percentage of the 90% of the overall motor TP insurance business premium of the industry for the immediate preceding financial year. The minimum percentage shall be equal to the simple average of the insurer’s share in total gross premium of the industry and its share in the total motor insurance premiums of the industry, both in the immediate preceding financial year.

At present, although the motor vehicle law provides for compulsory motor TP insurance for vehicles, there is no provision neither in it nor in the insurance law stipulating the obligations of an insurer to underwrite motor TP risks.

There are losses in the motor segment because of the TP segment, where pricing is regulated. Price increases have not been enough to cover the losses. Combined ratios for the motor insurance segment, have stood at between 150% and 160% for the industry. It is estimated that the combined ratio for motor insurance may even cross 200% by the end of this month on the back of higher claims, especially from commercial vehicles, reported Business Standard.

Meanwhile, insurers are lobbying IRDAI to increase the minimum claim level for mandatory third-party surveyor assessments to be carried out to INR100,000 (US$1,601), reported The Economic Times. If approved, most policyholders could be at a disadvantage because insurance companies can reject their claims.

Mr S Anoop Kumar, an independent surveyor based in Hyderabad, said: "Most motor insurance claims fall below INR100,000." The average motor insurance claim is INR30,000 for personal vehicles and INR50,000 for commercial vehicles. The minimum sum for an  assessment by an external surveyor stands at INR20,000, a level unchanged for several decades.

Insurers argue that the number of licensed surveyors in the industry is not sufficient to process the number of claims in the sector each year. There are 11,000 licensed surveyors in India.

http://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/32380/Type/eDaily?utm_source/Edaily-News-Letter/utm_medium/Group-Email/utm_campaign/Edaily-NewsLetter



Lloyds to tap ultra-low insurance penetration in Gulf

Reinsurer plans to boost growth by getting more managing agents on its platform

Vincent Vandendael | Director of international markets at Lloyds

Dubai: Lloyds expects a growing penetration of insurance services across the Gulf and wider Middle East and North Africa (Mena) region, which could help boost growth by getting more managing agents on its platform, a senior official said.

The current penetration in the Gulf is about 1.6 per cent to the Gross Domestic Product (GDP) compared to 6 per cent on a global scale, Vincent Vandendael, director of international markets at Lloyds, told Gulf News.

In London, the reinsurer has 58 managing agents out of which nine — Amlin, Argo Re, Beazley, Catlin, Liberty, Markel, Talbot, Visionary and Watkins — are currently in Dubai.

“The GDP growth alone here is very healthy. There is a huge potential. The way to unlock this potential is to educate the industry, educating people,” said Vandendael. “The more this market place grows, the more there will be demand for insurance. There is going to be more interest from the remaining 49 managing agents.”

Vandendael said that as the middle class grows, the desire to protect their wealth will also rise, thus creating demand for more insurance.

“Singapore had only three Lloyds insurers about 12 years ago and it took them 12 years to bring that number up to 22. Here we have nine already, so that just [shows] how things have changed for Lloyds as well,” he said. “Many of the managing agents in Singapore have shown interest in joining the company’s Dubai operations.”

The reinsurer covers the marine, aviation, transport, construction and energy sectors. It plans to cover political violence, accident and health, trade credits and terrorism due to high demand from the local industry.

For example exporters to the United States could be provided with product liability insurance.

“We have an existing business here. Just in the GCC area, we have about half a billion dollars [Dh1.83 billion] of existing business and about $900 million when we look at broader Mena region. We are not starting from scratch,” he said.

The company had earlier considered opening office in 2007-08, but the plan was put on hold due to the financial crises. “We have a much clearer view of the world situation. Even though there are tensions, we are much more comfortable,” he said.

Transfer of risk

“If you are in a region with high [proportion of] national catastrophes [as in] the United States and China, we can see immediately what insurance can do,” he said.

Vandendael said insurance it can revive both businesses and the lives of individuals by transferring risk from a government’s balance sheet to an insurance firm’s balance sheet, allowing government to focus on what it does best.

“Insurance is about large numbers, if we have a large catastrophe in Japan it is unlikely that it would be co-related with an earthquake in the United States,” he said. “Having a widespread portfolio helps in such situations and a good spread of business can be supported by the balance sheet.”

Lloyd’s total premium volumes worldwide stand at an estimated $41 billion, with about 38 per cent of that being reinsurance while the rest is insurance.

Of the total, 43 per cent of its business comes from North America, 18 per cent comes from the United Kingdom, 15 per cent from continental Europe and the rest from Asia and Latin America.

http://gulfnews.com/business/sectors/banking/lloyds-to-tap-ultra-low-insurance-penetration-in-gulf-1.1471971



FDI changes in insurance norms may benefit small local partners

MUMBAI: Nearly three-fourths of the insurance companies operating in the country are 'capital surplus', ie, they do not need any fresh capital.Hence, the government's decision to raise the foreign direct investment (FDI) limit in the insurance sector will help many local partners who plan to sell their stake rather than sell new shares, which would have led to cash flowing into the company

 

The Cabinet, through an Ordinance, has raised the FDI limit in insurance to 49%, recommending a composite cap of 49%, which would include all forms of foreign direct investments and foreign portfolio investments

This move will help local partners to make money hand-over-fist as there is likely to be more secondary stake sale.

"There will be a secondary deal if the company has surplus solvency and money will flow into the Indian promoter," said Abizer Diwanji, national head financial services, EY. "It will depend on the preagreed transaction that the promoters have entered into."

The select committee on insurance, in its report, had said that the incremental equity should ideally be used for expansion of capital base to strengthen the insurance sector while approving the higher composite FDI limit of 49% from 26%.

The regulator, Insurance Regulatory and Development Authority (Irda), has estimated an additional capital need of .`44,500 crore in the life insurance sector, and Rs 10,500 crore in the non-life insurance sector over the next five years.

Till March 31, 2013, Bajaj Allianz has solvency ratio-size of capital upon all its risk of 6.34, Kotak Life Insurance 5.21 and HDFC Life 2.17, according to the latest report by Irda. The regulator stipulates all insurance companies to maintain solvency ratio of 1.5.

"Any decision to divest stake will be taken by the promoters. Currently, we are adequately capitalised and do not require any funding," said Sandeep Batra, executive director, ICICI Prudential Life Insurance Company. ICICI Prudential Life Insurance has a solvency ratio of 3.96.

Small life insurance firms need capital for faster growth in the capital-intensive sector, which has witnessed compounded annual growth of 18.4%, while non-life insurance sector has grown 16.6% in the past 14 years.

"As per the agreement, Standard Life can increase its stake in the company at a fair value," said Vibha Padalkar, chief financial officer and executive director HDFC Life. "Since our's is the first insurance company to have received licence, it is natural progression to list the company, but it is the promoters' call."At present, there are 53 insurance companies operating in India, of which 45 are in the private sector.

 

http://articles.economictimes.indiatimes.com/2015-01-05/news/57705585_1_insurance-sector-insurance-regulatory-hdfc-life

Insurers May Need Around Rs. 8,000 Crore as New Capital: Icra


Mumbai: The non-life segment will lead the recapitalisation drive in the domestic insurance sector, as the industry as a whole may raise up to Rs. 8,000 crore over the next five years to shore up equity capital, according to a report by Icra.
The rating agency said in Mumbai on Wednesday that it sees general insurers raising more capital as the life sector is already well-capitalised.
"We see capitalisation happening in non-life insurance segment falling in the range of Rs. 4,500 crore to Rs. 8,000 crore over the next five years, led by non-life players," Icra senior vice president and co-head of financial sector for ratings Vibha Batra said.
Private sector non-life insurers would raise capital to maintain their compounded annual growth rate (CAGR) at 15-20 per cent during the next five years. Around 60-70 per cent of this capital infusion should come from foreign partners to increase their solvency ratio from the current minimum requirement of 1.5 per cent to 1.75
per cent in the days to come, she said.
The life insurance sector, which is currently growing at a CAGR of 10-12 per cent, does not require capital infusion.
"However, keeping in view the fact that the country is under-penetrated, we do see some capitalisation happening in the life sector too," she said, adding that this capitalisation would be comparatively more in the traditional policy segment than in unit-linked insurance plans.
The Icra report further said nine life insurers have solvency margins double than that of the regulatory requirement of 1.5 per cent and hence there is no imminent capital requirement for them.

Mumbai: The non-life segment will lead the recapitalisation drive in the domestic insurance sector, as the industry as a whole may raise up to Rs. 8,000 crore over the next five years to shore up equity capital, according to a report by Icra.

The rating agency said in Mumbai on Wednesday that it sees general insurers raising more capital as the life sector is already well-capitalised.

"We see capitalisation happening in non-life insurance segment falling in the range of Rs. 4,500 crore to Rs. 8,000 crore over the next five years, led by non-life players," Icra senior vice president and co-head of financial sector for ratings Vibha Batra said.

Private sector non-life insurers would raise capital to maintain their compounded annual growth rate (CAGR) at 15-20 per cent during the next five years. Around 60-70 per cent of this capital infusion should come from foreign partners to increase their solvency ratio from the current minimum requirement of 1.5 per cent to 1.75 per cent in the days to come, she said.

The life insurance sector, which is currently growing at a CAGR of 10-12 per cent, does not require capital infusion.

"However, keeping in view the fact that the country is under-penetrated, we do see some capitalisation happening in the life sector too," she said, adding that this capitalisation would be comparatively more in the traditional policy segment than in unit-linked insurance plans.

The Icra report further said nine life insurers have solvency margins double than that of the regulatory requirement of 1.5 per cent and hence there is no imminent capital requirement for them.


http://profit.ndtv.com/news/industries/article-insurers-may-need-around-rs-8-000-crore-as-new-capital-icra-662162


 

Insurers face mega claim for Bathinda Refinery fire

MUMBAI: Insurance companies including New India Assurance, General Insurance Corporation are staring at a hit of Rs 650 crore from a fire that broke out at Mittal-Hindustan Petroleum refinery in Bathinda. 

The terror attack on the two Mumbai hotels, Taj and Oberoi, in 2011, had led to Rs 500 crore claim. Unlike 2011, when the claim was paid from the terrorism pool, insurers will have to cough up for the damage from the fire. 


New India Assurance is the lead insurer with 75 per cent share in the policy. Other insurance companies include United India and SBI General Insurance. India's national reinsurer GIC is the lead reinsurer for the policy. 

The refinery was insured for Rs 7,500 crore under mega risk policy. A New India Assurance executive said that surveyors are assessing the loss. Such policies cover any loss of profit due to business interruption caused by a shutdown due to fire or natural calamity. 

"A claim of around Rs 650 crore is expected from a vapour fire explosion in a plant of HMEL in Bathinda. This is the biggest claim in recent times," said A K Roy, chairman and managing director General Insurance Corporation Re. "We have provided reinsurance and have got protection against it. Our exposure can go up to Rs 100 crore." 

A New India Assurance executive added that the company will not have to shell out more than Rs 50 crore. As a mega risk policy with sum assured of more than Rs 2,500 crore at any one location, it is insured under a programme by a number of reinsurance companies. 

The fire had broken out in vacuum gas oil treating unit of the refinery. According to media reports, statement issued by the company had said that there was no casualty or injuries of any kind. The policy covers any loss to the property and business interruption. 

Generally, refineries go for mega risk policies to insure their assets from any casualty, loss of property or business interruption. Oil and Natural Gas CorporationBSE -0.19 % ( ONGCBSE -0.19 %), the largest Indian risk, gets insurance from the London market. 

A few years back, the industry had seen a similar case when a fire broke out at a plant of Indian Oil CorporationBSE -0.53 % near Jaipur. The claim, however, was limited to Rs 140 crore. This incident is unlikely to increase the premium cost for firms since the incurred claim ratio under fire has dropped to 68.82 per cent in 2012.13 from 96.78 per cent a year earlier. 

So for every Rs 100 premium earned the industry has paid Rs 68 as claim. Though the segment has turned profitable, the non-life insurance industry is still reeling under losses. In 2012-13, underwriting loss-claim paid to premiumearned of the industry was at Rs 6,984 crore. 

 

 

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