Companies feel the pinch as GIC ups reinsurance rate by almost eight times

MUMBAI: Corporates in several sectors such as pharma, textiles and steel have seen their property insurance rates soar by as much as eight times after national reinsurer GIC Re revised the rates at which it will provide reinsurance. GIC has justified the higher cost, saying that even with the revised rates the premium only matches claims in eight sectors where rates have been increased.

The revision, which came into effect from March 1, was announced only on February 21 to insurance companies. According to risk managers, since most policies are co-terminus with the financial year, there is not enough time for them to sort out their insurance purchases.

“We have seen our premium gone up by six times. This is unfair as our claim ratio does not justify it. If the premium hike is aimed at correcting losses that are happening elsewhere, why should good clients pay higher rates?” said Raymond group CFO Sanjay Bahl. He added that this was a huge headwind for the textiles sector.

GIC officials said that this was an overdue correction as the portfolio is generating underwriting losses due to rates falling by as much as 99% since de-tariffing in 2007. “The domestic fire treaties for GIC Re have been running at a combined ratio of 100% consistently for the last few years. Hence, some urgent remedial measures had to be undertaken,” a spokesperson said.

Industry associations have made a representation to the regulators and companies are seeking legal opinion.