Global property programme local policies in India will require increased attention as a result of changing tariffs in the Indian insurance market, according to a whitepaper from Willis Towers Watson. The paper notes that while some tariffs were reduced, most have increased as a result of property tariffs issued by the General Insurance Council.
The paper, authored by Disha Sahni, vice-president, network country manager, Willis Towers Watson, notes that the market was de-tariffed in 2007 when the Insurance Regulatory and Development Authority of India de-tariffed the market for premium rates. But in March 2019, the Council issued property tariffs on ten occupancies (warehouses, steel manufacturing, hydro plants, etc) in response to catastrophe losses – this meant charging a separate premium rate for the STFI (storm, tempest, floods, inundation) group of perils and earthquake, without giving any discount in those rates. From the start of 2020, this was expanded to more than 300 occupancies.
In the whitepaper, The changing landscape for property insurance rates in India, Ms Sahni says there are a number of reasons for the increase in basic risk rates, including recent extremely high discounting of premiums, risk rates not being commensurate to the exposure, and the level of catastrophe losses. In addition, General Insurance Corporation of India (GIC Re) has changed market conditions for most occupancies based on burning cost analysis during the last ten to 14 years.
Insurance carriers are required to cede 5% of each risk to GIC Re as a mandatory obligatory cession, and preference in reinsurance cessions is to be given to Indian branches of foreign reinsurers, before ceding to cross-border reinsurers.
According to Ms Sahni, the impact on global property damage/business interruption programmes varies.
“Depending on the carrier, we have seen the following: tariffs applied to 100% of the risk; tariffs applied on local retentions and cessions to GIC Re, discounted rates applied to the cession that is ceded back to the global carrier; exportability increased to 93% with regulatory approvals; amendments of sub-limits and policy conditions to obtain lower rates/premiums,” she says.
“As a result of the new tariff, we are seeing local premium increases as high as 250% on some classes of risk,” adds Ms Sahni.
She explains that while some tariffs were reduced, most have increased, and as a result, global programme local policies will require increased attention. She adds: “Carrier selection is important. Determine from the outset the position of the programme carriers in India with respect to the above.”
She concludes with a number of recommendations:
- Start new and renewal negotiations well in advance of effective/renewal date
- Confirm the construction, occupancy protection and equipment description to ensure an accurate rating
- Review values at risk, especially given Covid-19 and reduced operations affecting business interruption
- Break out more risky occupancies from lower-risk ones and make sure the insurer applies the correct tariff, including all possible discounts
- Ask for quotes one month before effective date due to cash before cover
- Do not bind without being satisfied with the India placement.
For more information on property insurance rates in India, click here.