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NON-LIFE INSURANCE MARKET

Discuss NON-LIFE INSURANCE MARKET within the Service Sector Management forums, part of the Resolve Your Query - Get Help and discuss Projects category; NON-LIFE INSURANCE MARKET In December 2000, the GIC subsidiaries were restructured as independent Insurance Companies. At the same time, GIC ...

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Sunanda K. Chavan
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NON-LIFE INSURANCE MARKET - October 11th, 2010

NON-LIFE INSURANCE MARKET

In December 2000, the GIC subsidiaries were restructured as independent Insurance Companies. At the same time, GIC was converted into a national re-insurer. In July 2002, Parliament passed a bill, delinking the four subsidiaries from GIC.

Presently there are 12 General Insurance Companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the General Insurance business, the private players are slowly gaining a foothold.

According to estimates, private Insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premiums worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their operation in 2001.

With a large capital outlay and long gestation periods, infrastructure projects are fraught with a multitude of risks throughout the development, construction and operation stages. These include risks associated with project implementation, including geological risks, maintenance, commercial and political risks.

Without covering these risks the financial institutions are not willing to commit funds to the sector, especially because the financing of most private projects is on a limited or non- recourse basis.

Insurance companies not only provide risk cover to infrastructure projects, they also contribute long-term funds. In fact, Insurance companies are an ideal source of long term debt and equity for infrastructure projects. With long term liability, they get a good asset- liability match by investing their funds in such projects.

IRDA regulations require Insurance companies to invest not less than 15 percent of their funds in infrastructure and social sectors. International Insurance companies also invest their funds in such projects.

Insurance costs constitute roughly around 1.2- 2 percent of the total project costs. Under the existing norms, Insurance premium payments are treated as part of the fixed costs. Consequently they are treated as pass-through costs for tariff calculations.

Premium rates of most General Insurance policies come under the purview of the government appointed Tariff Advisory Committee. For Projects costing up to Rs 1 Billion, the Tariff Advisory Committee sets the premium rates, for Projects between Rs 1 billion and Rs 15 billion, the rates are set in keeping with the committee's guidelines; and projects above Rs 15 billion are subjected to re-Insurance pricing. It is the last segment that has a number of additional products and competitive pricing.

Insurance, like project finance, is extended by a consortium. Normally one insurer takes the lead, shouldering about 40-50 per cent of the risk and receiving a proportionate percentage of the premium. The other companies share the remaining risk and premium.


The policies are renewed usually on an annual basis through the invitation of bids. Of late, with IPP projects fizzling out, the Insurance companies are turning once again to old hands such as NTPC, NHPC and BSES for business.
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Jitendra Mazee
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Re: NON-LIFE INSURANCE MARKET - January 17th, 2018

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Originally Posted by sunandaC View Post
NON-LIFE INSURANCE MARKET

In December 2000, the GIC subsidiaries were restructured as independent Insurance Companies. At the same time, GIC was converted into a national re-insurer. In July 2002, Parliament passed a bill, delinking the four subsidiaries from GIC.

Presently there are 12 General Insurance Companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the General Insurance business, the private players are slowly gaining a foothold.

According to estimates, private Insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premiums worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their operation in 2001.

With a large capital outlay and long gestation periods, infrastructure projects are fraught with a multitude of risks throughout the development, construction and operation stages. These include risks associated with project implementation, including geological risks, maintenance, commercial and political risks.

Without covering these risks the financial institutions are not willing to commit funds to the sector, especially because the financing of most private projects is on a limited or non- recourse basis.

Insurance companies not only provide risk cover to infrastructure projects, they also contribute long-term funds. In fact, Insurance companies are an ideal source of long term debt and equity for infrastructure projects. With long term liability, they get a good asset- liability match by investing their funds in such projects.

IRDA regulations require Insurance companies to invest not less than 15 percent of their funds in infrastructure and social sectors. International Insurance companies also invest their funds in such projects.

Insurance costs constitute roughly around 1.2- 2 percent of the total project costs. Under the existing norms, Insurance premium payments are treated as part of the fixed costs. Consequently they are treated as pass-through costs for tariff calculations.

Premium rates of most General Insurance policies come under the purview of the government appointed Tariff Advisory Committee. For Projects costing up to Rs 1 Billion, the Tariff Advisory Committee sets the premium rates, for Projects between Rs 1 billion and Rs 15 billion, the rates are set in keeping with the committee's guidelines; and projects above Rs 15 billion are subjected to re-Insurance pricing. It is the last segment that has a number of additional products and competitive pricing.

Insurance, like project finance, is extended by a consortium. Normally one insurer takes the lead, shouldering about 40-50 per cent of the risk and receiving a proportionate percentage of the premium. The other companies share the remaining risk and premium.


The policies are renewed usually on an annual basis through the invitation of bids. Of late, with IPP projects fizzling out, the Insurance companies are turning once again to old hands such as NTPC, NHPC and BSES for business.
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