Financial Daily from THE HINDU group of publications
Thursday, Aug 11, 2005

News
Features
Stocks
Port Info
Archives
Google

Group Sites

Money & Banking - General Insurance


Dabhol cover: GIC to review reinsurance support

C. Shivkumar

ICICI-Lombard had won the silent risk cover for DPC quoting a premium of Rs 12.24 crore.

Bangalore , Aug. 10

THE national re-insurer, General Insurance Corporation (GIC), has begun cracking the whip at primary non-life insurers in the country.

GIC, in a move that sent tremors across the industry, has threatened to withdraw reinsurance support for insurers providing risk cover to Dabhol Power Company (DPC). This is one of the first interventions by GIC after it became national re-insurer, sources said.

ICICI Lombard is the lead insurer for DPC (now renamed Ratnagiri Gas and Power Company Ltd) for a sum assured of Rs 8,063 crore. ICICI-Lombard had won the silent risk cover for DPC quoting a premium of Rs 12.24 crore. DPC is provided silent risk, since the plant is currently not operational. Therefore the risk covers are more restricted than operational risks.

Last year, the lead insurer for the project was New India Assurance Company Ltd (NIACL), which had quoted a premium of Rs 19 crore. This year, since ICICI's quote was lower by Rs 7 crore, it was made the lead insurer. But NIACL has approached the Tariff Advisory Committee (TAC) of the Insurance Regulatory and Development Authority, complaining against breach of tariff guidelines.

Faced with this complaint, GIC has threatened to withdraw reinsurance support. ICICI-Lombard, when contacted, denied receipt of any such communication from GIC. ICICI-Lombard's head of marketing, Mr Kartik Jain, said, "We have not received any communication of GIC. They have accepted our premium. As and when we receive communication from them, we are prepared to explain the rationale for the tariff. "

However, co-insurers for the DPC risk, who had sought reinsurance support from GIC for their respective shares, were informed in a recent communication, a copy of which is available with Business Line, that reinsurance support was unlikely.

The communication to the co-insurers said, "We have been given to understand that the Leader has committed breach of tariff in respect of this risk and a case is pending against them. In view of this, we would like to review our confirmation of cession to the treaty." In this communication, "We" refers to GIC, and "Leader" to ICICI-Lombard. "Cession" implies ceding of liability to the reinsurer through annually renewable treaties.

The communication also said, "Breach of tariff will entail cancellations of support from inception." GIC officials, when contacted, confirmed despatch of the letter, and said, "Wherever there are tariff breaches, we are not obliged to provide reinsurance support."

Sources said that, if the national re-insurer were to carry out its threat, ICICI-Lombard could be left with the prospect of finding alternative re-insurers in the international markets. The risk was far too large to be absorbed on its balance sheet even after assuming that substantial portions of the risk would have been co-insured with other private or public-sector non-life insurers. However, these re-insurers would also have to accept the tariff that has been quoted.

Another alternative, the sources said, would be for the non-life insurer to make good the differential premium either from the policy holder or from itself, if there was really a breach of tariff. ICICI-Lombard does not, however, think there is a breach of tariff for the risk.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page


TMB Ltd

Stories in this Section
Payments Corporation on anvil — RBI committee meeting today


Denouncing outsourcing
Rupee tad weaker; bonds bullish
BoB retail loans cheaper
Bajaj Allianz Life ties up with 5 co-op banks
Dabhol cover: GIC to review reinsurance support
StanChart may float agri-financing co
Govt unveils new package for SMEs — Credit to double by 2009-10; `Medium Enterprise' clearly defined
T-bills auction fully subscribed
SBI(Kerala Circle) staff observe protest day


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line