Munich Re, the world’s largest reinsurance company, has said it would be increasing the reinsurance premium rates for Indian insurance companies from April 2009.
Reinsurance is insurance for an insurance company.
By reinsuring, an insurance company reduces the risks associated with the policies in case there are large claims. Insurers transfer a portion of their risk portfolios to reinsurance companies by some form of agreement.
Insurance companies will renew their reinsurance contracts on April 1, 2009. Although most insurance companies reinsure a major portion of their risks with government-owned General Insurance Corporation (GIC), officials said that those programmes which are led by Munich Re could be impacted.
In such a scenario, insurance companies would have to reduce reinsurance capacity or move to some other programmes from lower rated reinsurers.
Tobias Farny, Senior Executive (Indian sub-continent), Munich Re said, “We are seeing a financial crisis and are discussing with our clients (insurance companies) on how to proceed. Globally, the reinsurance rates are rising. We expect reinsurance terms to harden... In India, the rise in reinsurance premium rates will be on a company-to-company basis, depending on whether the client has good risk management measures.”
This means Indian insurers’ cost for buying insurance for itself will go up.
Says Swaraj Krishnan, CEO, Bajaj Allianz General Insurance, “The renewal season is going to be difficult for insurance companies and there will be pressure on an upward movement of rates in the direct insurance market also.”