News Non-Life22 Aug 2018

India:Kerala floods may lead to higher reinsurance premiums or deductibles

22 Aug 2018

General insurance experts have said that there will be an increase in the premiums charged by reinsurers for covering flood risks, following losses suffered in floods in the southern state of Kerala.

Reinsurers may also increase the loss deductibles to quote a lower rate to cover catastrophic risk, according to a report by Indo-Asian News Service.

In the case of Kerala floods, the loss will be higher in the motor insurance portfolio as the state has a sizeable number of costly vehicles, they added.

"Incidents of floods in India seems to be regular in recent years. The reinsurers may ask the primary insurers to manage the risk with their premium rates. If the primary insurers want a catastrophic insurance cover, then the reinsurers may levy a higher deductible to cut down on their own losses in case of flood losses," a senior insurance industry official told IANS on condition of anonymity.

"The deductible will vary from primary insurer to insurer based on the loss experience," he added.

Mr KK Srinivasan, a former member of the IRDAI, told IANS, "The reinsurers may increase their rates and also the deductibles. But the premium rate for the policyholders may not be increased by the primary insurers on their own. They have to get the insurance regulator's nod,"

The chief minister of Kerala has said the extent of damage in the state would be around INR200bn ($2.86bn). Analysts say insurance companies will bear around 5% of the total economic loss, or about INR10bn.



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