Eqecat predicts Japan industry loss of $12bn-$25bn

Modelling firm Eqecat estimates that the insured loss from the Japanese earthquake will be between $12bn and $25bn, which is significantly under AIR Worldwide's forecast of a $15bn to $35bn industry loss.

The estimate includes damage from the earthquake and ensuing tsunami and fires, as well as losses from automobiles, marine, life and personal accident insurance line. Commercial costs - one area where it is expected costs will be passed onto the international reinsurance markets - were not mentioned. Eqecat predicted $8bn-$15bn in quake-related losses, of which about a quarter or $2bn-$4bn will be ceded to the Japan Earthquake Reinsurance Pool (JERP).

In contrast with AIR, the firm said that tsunami flooding losses are modelled as they are covered under earthquake policy endorsements.

Life losses were put at $2bn-$3bn. Eqecat noted the average life insurance policy limit was about $360,000 and that at least 10,000 people are currently confirmed dead or missing. Eqecat predicted that marine losses would make up $1bn-$3bn of the total insured costs, while personal accident lines would constitute $1bn-$2bn and auto losses would be up to $1bn.

The firm noted that few damaged cars would have earthquake cover as standard policies exclude the peril.

Its marine estimates included losses to ships, piers and wharves, as Eqecat cited reports that 90 large commercial ships and thousands of smaller vessels have been pushed far inland by the tsunami.

Eqecat previously forecast that total economic losses from the disaster would exceed $100bn.



Chartis faces $1bn Q1 cat losses

AIG said its P&C arm Chartis faces an estimated $1bn in Q1 pre-tax net catastrophe losses, including $700mn from the Japan quake and tsunami. The $1bn total also includes losses from last month's New Zealand earthquake, US winter storms, northeast Australian floods, Cyclone Yasi, and the Brazil floods, and is equivalent to 1.1 percent of total AIG shareholders' equity as at 31 December.

However, the Japan estimate does not include losses from AIG's general insurance operations in the country that participate in the Japanese Earthquake Reinsurance Company (JERC).

The company said it had excluded losses from JERC - the exclusive provider of earthquake cover for homeowners' property and contents in Japan - because the industry loss "remains unquantified at this time".

The insurer added that, in accordance with Japanese accounting rules, it had previously established catastrophe reserves of around $500mn for potential claims in relation to quake damage on personal dwellings, and has deposited funds for a "substantial portion" of the reserves with the JERC. The deposits go towards paying the quake claims, reducing the impact on the liquidity of the operations, explained AIG.

With US GAAP prohibiting cat reserves to be set up before a cat event has occurred, the maximum pre-tax loss AIG's general insurance operations in Japan can incur from quake claims on homeowners' property is $575mn, the insurer said.

The figure includes exposure from its 54.66 percent stake in Fuji Fire and Marine Insurance Co.

Insurers to lose 3.5k cr on motor claims

The non-life insurance industry stands to lose almost three times the profit it made last year by way of additional provisions for motor third party insurance claims. The government has said that the non-life industry runs the risk of insolvency if motor insurance premiums are increased.

"The insurance companies would incur a loss of approximately Rs 2,500-3,500 crore in the current year (2010-11) on account of this (motor insurance) business of which a substantial portion will be borne by the public sector insurance companies," minister of state for finance Namo Narain Meena said in a written reply to the Lok Sabha on Friday. Last year, profits made by the non-life industry had managed to touch Rs 1204.51 crore after growing three-fold over the previous year.

The non-life industry is suddenly staring at a Rs 3500cr hit on its profit and loss statement because it now turns out that companies had under provisioned for third-party claims by grossly underestimating the compensation awarded by courts.

In January, the Insurance Regulatory and Development Authority (IRDA) had proposed a review of motor insurance premium rates for third party liability cover. If the draft is implemented, it would result in a 10 per cent increase in premium for private cars and two wheelers and up to 80 per cent for goods carriers.

Insurance cos working on 'drive less pay less' policies

Drive less, pay less. That's going to be the selling point of at least three motor insurance companies . Modelled on the popular model followed in Italy, this policy lets you pay the premium according to the miles you drive. If you are not a frequent user of your vehicles, you get to pay less premium when your motor insurance policy comes up for renewal.

Bajaj Allianz, ICICI Lombard and Bharti AXA General Insurance are working on versions of the so-called pay-as-you-drive policies. ICICI Lombard has, in fact, initiated a pilot project under which it has installed tracking equipment on a set of vehicles - a mix of owner-driven and commercial.

The equipment are currently tracking data like distance traversed, condition of roads used, driving time - like day or night. "We started the pilot project some six months ago and are now collecting data. Once the volume of the data reaches a critical level we will engage our actuaries - persons who do all the mathematics while designing an insurance product, to design a 'pay-as-you-drive' policy," said Amitabh Jain, head motor customer services at ICICI Lombard.

Allianz owns 20% in Berkshire India, documents show

German insurance company Allianz SE, which owns 26% of Bajaj Allianz, is also a minority stakeholder in Berkshire India, according to the company’s filings with the Registrar of Companies.

Allianz SE holds 45 lakh shares, or 20% of the share capital of Berkshire India.

The remainder is owned by BHG Structured Settlements, a Berkshire Hathaway company.

Kamesh Goyal, chief executive officer of Allianz Asia Pacific, was one of the first directors of Berkshire India, but had stepped down from the board before it became a corporate agent. Another director was Debadatta Sengupta who too is no longer with the board, said a Berkshire India spokesperson. Among the other directors were Ajit Jain from Berkshire Hathaway’s reinsurance business, and Forrest N Krutter and Kara Raiguel, also from the Berkshire Hathaway Group.

The stock of Bajaj Finserv, which holds 74% stake in Bajaj Allianz, has risen more than 20% since its tie-up with Berkshire was announced.

Berkshire India declined to comment on Allianz’s stake in the company.

The memorandum of association for Berkshire India suggests the company would primarily act as distributors or advisors in the insurance segment. The main objects of the company on incorporation have been listed as ‘soliciting or procuring insurance business’, acting as an ‘insurance agent, corporate agent and/or insurance broker’, acting as ‘assessors, values and surveyors,’ or ‘advisors and consultants’.

Berkshire India had on Wednesday issued a statement saying it would act as a corporate agent for Bajaj Allianz General Insurance.

The announcement followed months of speculation about Warren Buffett picking up stake in Bajaj Finserv, which the company has denied.



Life insurance business nose-dives in crucial month of January

January, February and March are crucial months for the life insurance industry. The new business premium collection for January was 20% lower than December 2010 for individual single premium policies, while it was 10% lower for individual non-single premium policies. It is surprising to note that new business premium (NBP) for January was 20% lower than the NBP of December 2010 for individual single premium policies. NBP for January was 10% lower than the NBP of December last year for individual non-single premium policies.

Insurance companies are coming out with new traditional plans due to business shifting away from ULIPs (Unit-linked Insurance Plans). However, this does not explain why NBP has dropped substantially. Even the behemoth Life Insurance Corporation (LIC) of India was not spared.

PNB will buy stake or plan tie-up for insurance foray

Punjab National Bank will buy equity stake and enter into a corporate agency tie-up with one of the 10 life insurers it has shortlisted, according to a release issued by the state-run lender.

The firms are Aegon Religare Life, Aviva India, Bharti AXA Life, Birla Sun Life, DLF Pramerica Life, Future Generali Life, HDFC Life, Max New York Life, MetLife and Reliance Life.

According to chairman KR Kamath, PNB, which is keen to buy stakes in life as well as non-life firms, has received applications from 42 insurers. At present, PNB has a referral arrangement with the Life Insurance Corporation of India (LIC) for selling insurance products. It's an arrangement where banks or finance firms receive commissions for selling insurance products.

PNB had earlier joined hands with Vijaya Bank for a life foray but the proposal was later dropped. Another PSU lender, Syndicate Bank , has hired Ernst & Young to help choose a partner.

Public sector banks generally prefer three-way JVs like India First where Bank of Baroda , Andhra Bank and Legal & General UK hold shares.

After recent regulatory changes, insurers are under pressure to bring down distribution cost. As far as banks are concerned, the central bank has certain reluctance in allowing small and mid-sized banks buying significant stakes in insurance firms due to their huge capital requirement.

Bajaj Finserv spurts by 20% after Berkshire Hathaway deal

Shares of Bajaj Finserv shot up by 20 per cent on the BSE on Thursday following reports that Warren Buffett's Berkshire Hathaway has struck a deal with the company's unit Bajaj Allianz General Insurance.

US-based Berkshire Hathaway, a diversified holding company with subsidiaries that include GEICO, National Indemnity, on Wednesday announced its plans to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance. Berkshire India, a majority-owned unit of Berkshire Hathaway Inc has been incorporated to sell and distribute general insurance products in India through their online distribution portal — www.berkshireinsurance.com. The company's stock surged by 20 per cent to touch an upper circuit of Rs. 527.45 on the BSE on the back of heavy buying.

"Berkshire India will sell insurance directly to the consumer by utilising the internet portal and tele-marketing. Initially, the focus will be on motor insurance, but the company will continuously update its business model to meet the needs of the fast-evolving Indian insurance sector," it said.

Reduce tariff barriers, FDI curbs to fix infrastructure: Gary Locke

India must reduce its tariff and non-tariff barriers and consider lifting restrictions on foreign direct investment (FDI) in several areas to help it secure funds to help fix its infrastructure, U.S. Commerce Secretary Gary Locke said here on Friday. Addressing a media roundtable here, Mr. Locke said that allowing more FDI in sectors like infrastructure, banking and insurance and even the retail sector would greatly help these sectors get access to more funds and lower their costs. “Only 2 per cent of the roads are paved in India. It is estimated that India requires up to $1.2 trillion between now and 2030 to repair and upgrade its infrastructure which involves an eight-fold increase in per capita spending. That is clearly beyond the capability of India and that is where FDI will help.''

Although India has made progress in opening its markets to U.S. companies, a lot more remains to be done in this direction.

Speaking on the hike in the U.S. visa fee, Mr. Locke insisted that it was a temporary measure which applied to only certain size of business. “It is mainly targeted at technology companies with more than half their workers on H1 visas. It is however, only temporary and will expire automatically by 2015.''

Health insurers fear misuse of portability

 The insurance regulator's fiat giving unhappy health insurance customers the option to switch insurers evoked mixed response from the companies. The Insurance Regulatory and Development Authority (IRDA) on Thursday allowed policy holders to change their existing insurer without any change in the premium outgo.

Some insurers believe that the guidelines may have some adverse impact on the sector. "Portability can be genesis to various frauds and misuses. We need to evaluate the pros and cons of the move but we are confident that in the long run, it would be the company with the better services and integrity that would stand to gain in the market dynamics," Antony Jacob, CEO of Apollo Munich Health Insurance, said. A CEO of a south-based health insurance company said that in the absence of standardisation of products in India, the switching of insurers can leading to misunderstanding.
As per the guidelines, in case of a switch, the old health insurance company will have to share the details of policy in seven days. However, industry people believe that there can be logistic issues there as all health insurance companies do not have a centralised data processing facility.  Some industry experts believe that new system will require strong underwriting and selection process by the companies as there may be some misuse by policyholders.

http://timesofindia.indiatimes.com/business/india-business/Health-insurers-fear-misuse-of-portability/articleshow/7478066.cms#ixzz1Djd0Oxpm

Max India expects to turn profit on consol basis in FY11

NEW DELHI: Insurer and hospital operator Max India Ltd expects to be in the black in 2010/11 on a consolidated basis as its life insurance business turns around, a top executive said on Friday. A combination of change in product mix, volume and cost rationalisation had made the life insurance business profitable in Oct-Dec, Mohit Talwar, Director-Corporate Development, told Reuters by telephone.

He said Jan-March performance should be good enough to wipe out the company's losses during nine-month period ending Dec 2010.

Max India, which gets about 85 per cent of its revenue from life insurance business, has a 74:26 joint venture with New York Life International.

IRDA releases norms for merger of general insurance cos

 More than 10 years after opening up of the insurance sector, regulator Irda today proposed to allow mergers and acquisitions in the general insurance business that requires consolidation among the 24 industry players, most of which are loss-making.

To protect the interest of policyholders, they must be given right to exit from the insurer, which is on the block for acquisition, Irda said in its draft guidelines. An acquirer will need approvals from Irda, the Reserve Bank and the finance ministry, in case it has foreign direct investment.

Most of the 22 players in the private sector have foreign investment, which is capped at 26 per cent. Irda has also said that the intent of the acquirer should be clearly spelt out. The regulator has retained with itself the power to vet the valuations arrived at by the companies involved in M&As.

According to industry players, most of the private sector general insurance companies require fresh infusion of capital which may come from foreign partners, who have been constrained by the FDI cap. The Bill to raise the FDI ceiling is pending in Parliament.

The general insurance business has remained loss making for want of capital, which is constrained due cap on foreign capital infusion.

At present, the Insurance Act provides for the M&As only for life insurance companies.

The fast growing general insurance space has many entities looking for M&A opportunities. There have been reports of Reliance General Insurance looking to buy majority stake in its rival Royal Sundaram.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-releases-norms-for-merger-of-general-insurance-cos/articleshow/7477713.cms

Men oin blue insured fo Rs.2.3 crore each for world cup.

The Indian cricket board has taken a personal accident policy worth $500,000 per player who is a part of the national team that will play in the World Cup. The BCCI has also taken another insurance policy to the tune of Rs 130 crore, which will shield it from financial losses in the event of a match being affected by bad weather.

Reena Bhatnagar, deputy general manager, Oriental Insurance Company, said, "The BCCI has bought the group personal accident policy from OIC. Each player can expect a financial benefit of up to Rs 2.3 crore under this policy."

The group insurance policy will be in force for two months between February 10 and April 9. "The policy can be invoked in case of death or total disability, permanent partial disability and temporary total disability to a player or a support staff member. The policy holders will be paid the monetary compensation for injuries that are sustained on and off the field during this 2-month period," said Leander Dias, an official from OIC.

The policy can also be invoked if a player or support staff member becomes a victim or sustains injury due a terror attack. An overseas mediclaim policy has also been bought for the team. "The board can expect reimbursement of hospitalization expenses on the treatment of players," Dias said

http://timesofindia.indiatimes.com/sports/cricket/world-cup-2011/news/Men-in-Blue-insured-for-Rs-23-crore-each-for-World-Cup/articleshow/7479334.cms

IRDA releases norms for merger of general insurance cos.

More than 10 years after opening up of the insurance sector, regulator Irda today proposed to allow mergers and acquisitions in the general insurance business that requires consolidation among the 24 industry players, most of which are loss-making. To protect the interest of policyholders, they must be given right to exit from the insurer, which is on the block for acquisition, Irda said in its draft guidelines.

"The transacting parties shall ensure that policyholders of the transferor entity are migrated in a manner which ensures that their existing policies are continued to be serviced by the transferee entity on terms and conditions no less favourable than those existing prior to the merger," Irda said. An acquirer will need approvals from Irda, the Reserve Bank and the finance ministry, in case it has foreign direct investment. Most of the 22 players in the private sector have foreign investment, which is capped at 26 per cent. Irda has also said that the intent of the acquirer should be clearly spelt out. The regulator has retained with itself the power to vet the valuations arrived at by the companies involved in M&As.

"The Authority reserves the right to appoint an independent actuarial consultant to carry out actuarial valuation of the insurance business of the proposed transacting parties, the guidelines said. According to industry players, most of the private sector general insurance companies require fresh infusion of capital which may come from foreign partners, who have been constrained by the FDI cap. The Bill to raise the FDI ceiling is pending in Parliament. The general insurance business has remained loss making for want of capital, which is constrained due cap on foreign capital infusion.

"There are as many players in the general insurance space as in other markets. This guideline will play a part as the industry matures. The industry has been there for 10 years and this would give opportunity for old players," Sanjay Datta, head of health at ICICI Lombard General Insurance said. Irda has invited comments on the draft exposure guidelines by February 22. At present, the Insurance Act provides for the M&As only for life insurance companies. The fast growing general insurance space has many entities looking for M&A opportunities. There have been reports of Reliance General Insurance looking to buy majority stake in its rival Royal Sundaram.

source: http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-releases-norms-for-merger-of-general-insurance-cos/articleshow/7477713.cms

‘Irda’s new guidelines have slowed down business tremendously’

Kamalji Sahay, CEO, Star Union Dai-Ichi, speaks to DNA about how insurance will always remain a push product.

http://www.dnaindia.com/money/interview_irdas-new-guidelines-have-slowed-down-business-tremendously_1506102

Health insurance policy portability from July 1

In a big relief to dissatisfied health insurance policyholders, Insurance Regulatory and Development Authority (IRDA) on Thursday allowed them portability — shifting policies from one insurer to another on same terms — from July 1.

“The authority has examined various issues involved in the portability of the health insurance plan and has issued the necessary orders for effecting portability which will be implemented from July 1,” IRDA says in a statement. The portability facility will allow policyholders to switch over to another insurance company with the same conditions.

“The accepting insurer shall provide cover, at least up to the sum assured in the previous insurance policy,” the regulator said. The new facility will help those policy holders who stick to one insurer throughout life for fear of losing the cover for Pre Existing Diseases (PED).

http://www.hindu.com/2011/02/11/stories/2011021160362000.htm

Fidelity, First American, eye India entry

Land titles in India are nothing but ambiguous, but American land title insurers are keen on entering this market. In a step towards this, Fidelity National Financial (FNF), the US-based insurer’s India arm has already undertaken pilot projects with the governments of Chhattisgarh andDelhi.

Sameer Dhanrajani, country head- India, Fidelity National Financial India, said, “We are conducting a pilot project for Chhattisgarh chief minister Raman Singh’s local constituency Rajnandgaon. We have finished mapping the land. In New Delhi we started the pilot four months ago in East Delhi, which has a population of 4 million. We have completed the mapping of East Delhi, digitising would happen next. If we get the Title Law cleared, we would be in a position to launch in six months.”

The dubiousness of the land title market can be understood from the first phase results of the land mapping done by Fidelity National Financial India. The titles of every 1 in 12 properties in East Delhi are illegal, which is a whopping 3,33,333 titles.

According to FNF they dominate 45% market share in the US title insurance market, followed by First American Title Insurance Company at 22%.

At present, the government does not allow title insurance products to be sold in the country, but that will change with the Land Titling Bill, which is waiting in the Parliament for a nod from law makers. The Centre has already sanctioned `50,000 crore for digitising land records. The government of New Delhi, Chhattisgarh, Rajasthan, Gujarat, Madhya Pradesh and Karnataka are keen to utilise this fund and set up their digitised land record format.

Though these insurers would bring in their technology, the government does not allow any international insurance firm to hold majority stake, which is acting as a deterrent for these players. Dhanrajani said, “We would be comfortable if it is a 51:49 model, where we get the majority holding.We are also talking to private banks for a tie-up, which would help in distribution channels and getting access to work force.”

If we get the permission to operate pan India, the premium collection we expect will be around $5-8 billion in the first year itself.”

In the United States, 80% of the population opts for title insurance. Fidelity, which faces claims of 5-6% in the US expects it to be in the range of 10-15% in India

Insurers want separate tax deduction limit

With the Budget just round the corner, insurance companies have suggested a separate limit for deductions under Section 80C of the Income Tax Act, for long-term saving instruments like life insurance and exempt exempt exempt (EEE) treatment on the maturity proceeds of products. While insurers feel the direct tax code is going to change the way individuals invest, they want a separate limit for life insurance. Currently, the limit stands at Rs 50,000, including tuition fee and health insurance.

Experts feel it is the tenure of investments that should be incentivised and not the instrument. “It may be long-term insurance products, mutual funds or provident funds. The core competency of India is the saving habits of individuals and the government should incentivise the same in the long-term,” said P Nandagopal, managing director and CEO, IndiaFirst Life Insurance.

Last year, the government had absolved all charges, except the fund management charges, under the unit-linked insurance products from service tax.

“Life insurance and pension are the only segments of financial services that address the needs of individuals in the long-term. The government should encourage people to save for the long-term by providing a separate limit for long-term savings,” said T R Ramachandran, managing director and chief executive officer, Aviva Life Insurance. Currently, the deduction under Section 80C also includes short-term saving instruments like some mutual funds and fixed deposits.

Taxing the maturity proceeds would impact the life insurance business and the industry adversely, executives say.

The industry is also demanding a carry-forward of losses. For the last few years, industry players have been asking the government for permission to carry forward the losses to 12 years, as against 8 years at present. They say most insurers do not make profit even in the 10 year.

http://www.business-standard.com/india/news/insurers-want-separate-tax-deduction-limit/424466/

Lloyd’s to get a warm welcome

The government is planning a red carpet welcome for the world’s biggest insurer Lloyd’s to set shop in India. It is considering amending the Insurance Act to remove the legal hurdles that prevent the India foray of the London-based society of underwriters that handled gross premiums worth over £21.97 billion in 2009.

Currently, for an insurer to do business in India, it has either to be an Indian insurance company itself or a foreign company in joint venture with an Indian firm, subject to the 26% FDI cap in the sector. Lloyd’s could not use this route to enter India as it is not a company but a society of underwriters. Sources said the current provision in the Insurance Act which defines a “foreign company” as one that is not a “domestic company” would be changed to “a company or body established or incorporated under a law of any country outside India.” This would facilitate Lloyd’s entry.

Tata AIG, Max New York, Max Bupa, Bajaj Allianz are the insurance firms in India in which foreign players are involved.Sources added the government was also considering permitting overseas re-insurance companies to open branch offices in India with a minimum net worth of Rs 5,000 crore.

“Heath Insurance” would also be included in the Act and the minimum capital requirement for an exclusive health insurer would be pegged at Rs 50 crore. The proposals were discussed at a meeting between commerce and industry minister Anand Sharma and US commerce secretary Gary Locke on Monday. Locke wants the Indian government to take more steps to open its economy, particularly in dealing with trade barriers.

http://www.financialexpress.com/news/lloyds-to-get-a-warm-welcome/747770/0

Budget 2011: Health Insurance premium deduction should be increased to 25000

Industry body ASSOCHAM, said Association of Health Insurance premium deduction under section 80 D should be increased to Rs 25000 from Rs 15000. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its pre-budget memorandum recommended that the deduction (under section 80D) in respect of medical insurance premium of an individual or his family should be raised to Rs 25,000 from Rs 15,000.

The rationale given by ASSOCHAM is "In the context of the sharply increasing medical expenses, medical insurance premiums are escalating every year. Also, there is need to increase the penetration ratio of insurance by providing encouragement through tax reliefs for opting for medical insurance."