January 5, 2015
General insurance premiums are unlikely to harden this year despite record high catastrophe claims in India last year, as reinsurance rates have cooled internationally because of a flood of liquidity in the market and fewer calamities worldwide, according to industry executives. .
“International rates have softened by 10-20% during the treaties (reinsurance contracts) that have come up for renewals now,” The Economic Times reported, citing a senior executive of state-run General Insurance Corporation. “There are claims in the aviation sector but not big enough to harden the rates,” the source added. .
While there were fewer catastrophe claims globally last year, the situation was different in India. The Kashmir floods last September and Cyclone Hudhud in October on the east coast led to a higher number of claims in the local market. But their impact on premiums will be offset by the lower international rates, say the executives. .
Reinsurance capacity in the international market has increased with the entry of new players and that should also help keep the rates low, said Mr KK Mishra, Chief Executive of Tata AIG General Insurance. Another factor is liquidity. Big global reinsurance firms have raised around US$14 billion by issuing catastrophe bonds in 2014. .
Global reinsurers such as Munich Re and Swiss Re renew two thirds of their annual treaties with various non-life insurers in January, and the rest in April and July. In the Asia-Pacific, including India, renewals are typically effective from 1 April.