Fire policy to cost more as insurance companies add flood risk ...

August 14, 2012 ? 6:17 am

Mumbai:?Corporate?will have to shell out 15% more forfire and engineering insurance?as non-life insurance companies plan to include flood risk in the policy after having burnt their fingers in the recent catastrophes in Thailand, Japan and New Zealand.

Premium?has gone up from 0.15% to 0.25% per thousand of the sum assured. ?Weather pattern is changing everyday. Flood exposure is going up,? said KG Krishnamoorthy Rao, managing director and CEO, Future Generali General Insurance. GIC posted a maiden loss of Rs 2,469 crore in 2011-12 due to unprecedented natural catastrophes in Thailand, Japan, New Zealand and Australia.

Global reinsurance firm?Swiss Re?had termed 2011 as the costliest year with insured natural catastrophic losses exceeding $110 billion and 60% of it arising from the Asia Pacific region. Reinsurers have increased rates during the current financial year, and the companies are passing on the additional cost to customers.

Earlier, flood cover was free for corporates. Later, it was made optional for an additional premium. Now, insurers have defined specific premium on it. Standard fire policy covers risk from lightning, riot and others while flood insurance covers property against loss from flooding.

?Earlier, premium on flood perils were given for free. Companies are now defining flood cover and they have created tariff rates of 0.25% on the policy,? said a senior executive of a general insurance company. The regulator has asked the industry to come out with an agreement on flood risk to improve rating and solvency.

The regulator has said risk should be priced appropriately. ?Any nat cat (natural calamity) event will have a huge impact on the industry,? said a senior Irda official. ?Demand for setting up reserves for nat cat is being considered actively.?

General Insurance Corporation had plans to set up a pool to reinsure risks arising out of natural calamities in Asia and Africa. GIC is managing the natural catastrophes pool, which will have participation from around 200 members from Asia and Africa.

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