Bulk drug makers have seen a significant jump in insurance premiums for fire and allied perils this year. Premiums have jumped by at least three times from previous rates.
The increase follows a directive from domestic reinsurer GIC Re in February 2019, that mandate insurers to hike fire premiums for eight sectors. Bulk drug manufacturing is one of these sectors that also include rubber goods, plastics, textiles, thermal power plants, chemicals manufacturing steel plants and freight forwarders’ godowns.
Claims data collected from the Insurance Information Bureau showed a significant rise in loss ratios in fire insurance. For some insurers, loss ratios had crossed 150%, which meant that for every INR100 collected as premium, they paid INR150 in a claim. Natural calamities have led to a rise in fire and allied perils, like lightning and explosions, etc. Chennai floods were the trigger point. There was a huge number of claims from the floods that led to losses for insurers. In addition, in previous years, insurers had depressed premium rates as they engaged in price competition.