GIC Re expects a price rise of 10-15 % in Jan 1 renewals, to implement Lloyd's best practices:Srivastava

Mumbai: GIC Re,one of the top 15 global reinsurers, is expecting a price rise during Jan 1 renewals.In line with global reinsurance industry.

GIC Re, the third largest Asian reinsurer,having a 70 per cent market share in the Indian reinsurnace market, expects  a price rise of 10-15 per cent. during the January 1 renewals, said GIC Re chief.

``Yes, In line with global reinsurance industry, we do expect a price rise in the reinsurance market when the renewals happen in Jan 1, 2021..I expect a price rise of 10-15 per cent in the premium across the segments during the renewals.The global reinsurance industry had a three consecutive bad years in terms of catastrophic claims and.the existing Covid-19 pandemic has exacerbated the situation.Besides, the ILS capital flows have slowed down putting pressure on the capacities of global reinsurance industry said Devesh Srivastava, Chairman-cum-Managing Directo, GIC Re, in an exclusive interview with Asia Insurance Post.

GIC Re, with a  annual premium of over Rs 50,000 crore, receives 30 per cent of its business from overseas markets. On claims due to Covid -19 Pandemic, Srivastava said GIC Re domestic exposure to Covid-19 insurance claims is extremely limited.

``We don’t have Business Interruption(BI) claims in India because of the lockdown in the country as General Insurance Council(GI Council),the official representetive body of the Indian resurers and general insurers, with the advise of the Indian insurnace regulator IRDAI has clarified that no BI claims are admissible, without physical damages, because of Covid-19 Pandemic.We have some BI exposures in the overseas markets like Europe and we are waiting for clarity to make payments. But we have already provided for it and it is unlikely to put pressure on our balancesheeet,'' he  explained.

On the proposed Indian `Pandemic Pool , he said it is now at a discussion stage after an IRDA appointed panel has recommended for setting up such a Pool to be managed by the GIC Re. A Working Group,formed by the segment regulator IRDAI, has proposed the setting up of an Indian Pandemic Risk Pool, with a capacity of around Rs 75,000 crores,to address losses and unsettlement caused to the informal and low income sectors of the society and serve as a medium of providing relief to these sectors by the government in case of any pandemic or epidemic events in future.

The WG,which was headed by Suresh Mathur, executive director, IRDAI, has proposed a government backstop of around  Rs 75,000 crores at the initial stages of the Pool..Claim payment to the insureds will be parametric in nature.and multiple trigger mechanism will be set separately for an epidemic and a pandemic event, said the panel.

``The government and the IRDA.are now discussing the matter and we are yet to be involved in this.No doubt India needs a ``Pandemic Pool and it is a well thought out proposition. GIC Re will do whatever are necessary to set up the ``Pool’’. We are already managing Terror Pool, Nuclear Pool for the country successfully.We also manage a ``Natcat Pool’ for The Federation of Afro-Asian Insurers and Reinsurers (FAIR),'' he said.

``I am in favour of participation of other global reinsurers in the Indian ``Pandemic Pool’’.We will all share the risks to make the economy more stronger and ensure people of the country get the best of insurance services in a turbulent time like Pandemic,'he added.

Outlining his mid-term strategies to see GIC Re playing a larger qulaitative global role, he said state owned reinsurer is in the process of implementing some of the best practices of Lloyd’s of London in its own operations through its own syndicate at Lloyd’s 1947 which will help the Corporation emerge as a true global player, he revealed.

`` Right now, the situation is bit uncertain. Covid-19 Pandemic has created a huge confusion and road blocks in the overall business environment and plans for the future.However, we are looking at the situation with interest and trying to make the most of it. The time also affords us to sit and plan and consolidate our operations. To look at processes and streamline them. To ensure that our cedents get a much better level of servicing,'' he elaborated..

``We in the process of implementing some of the best practices of Lloyd’s of London in our own operations through our own syndicate at Lloyd’s 1947. This will help the Corporation emerge as a true global player,'' he said.

On focusing on profitability, he said, ``We have already addressed the key issues within our control of profitability and portfolio size We have taken further action to strengthen our balance sheet by increasing our outwards reinsurance purchases on the domestic portfolio by 37.5 percent, growing in size from $2.1 billion for 2019-20 to $ 2.7 bn for 2020-21, using high credit quality retro-cession counter parties,'' he said. .

GIC Re has cut its domestic agriculture capacity by 45%.Agriculture, which formed about 30 % of the risk portfolio on the back of government supported national crop scheme, is likely to shrink to about 18 percent during 2020-21. Thus, a major source of strain on GIC Re’s financials has been already addressed, he said. .

``GIC Re has already led decisive action on the domestic Indian property portfolio in 2019/20. These improvements will feed into the financial results going forward. These together with supplemental measures on the underwriting discipline and portfolio rebalancing will put GIC Re on the path of sustained underwriting profitability,said Srivastava.

Source: Asia Insurance Post