Dec 2019
Issue 150
NEWS AT J. B. BODA 3
PRIME STORY 4-5
LIC, GIC Re, New India 4-5
NATIONAL 6
India’s insurance sector may go global soon 6
GLOBAL 7-8
COVID-19 highlights need for expanded parametric insurance solutions 7
Legal battle over Covid insurance heads for Supreme Court 8
J. B. BODA GROUP SERVICES 9
NEWS AT J. B. BODA
Pan India Insurance Broking company virtual meeting was held on 20thOctober 2020 to discuss the half yearly review & business Strategy
Traditional Ayudha Pooja performed at our Survey - Chennai branch on 23rdOctober 2020 We prepare to address the current challenges with patience, stability, wisdom and faith to march
ahead with resolve at Vijayadasami (Dussehra)
Pan India Survey company virtual meeting was held on 22ndOctober to discuss the half yearly review and business strategy
PRIME STORY
LIC, GIC Re, New India
The Insurance Regulator and Development Authority of India (Irdai) has named three public sector insurance companies viz. Life Insurance Corporation (LIC), General Insurance Corporation (GIC Re) and New India Assurance – as ‘too big or too important to fail’ (TBTF) institutions or Domestic Systemically Important Insurers (D-SIIs), which will require enhanced regulatory supervision and a higher level of corporate governance. The regulator’s move has come ahead of the government plan to list the shares of LIC — India’s largest financial entity with assets of Rs 32 lakh crore — on the stock exchanges through an initial public offering (IPO) next year. GIC Re and New India are already listed on the exchanges.
LIC’s gross total income grew to Rs 6.1588 trillion for the year ended March 2020 from Rs 5.6078 trillion, showing a growth of over 9.83 per cent. GIC Re is the largest reinsurance company – or insurer’s insurer – with a gross premium income of Rs 510.3 billion. New India which is the largest general insurance company in the country had total global assets of Rs 746.09 billion as of March 2020. “Given the nature of their operations and the systemic importance of the D-SIIs, these insurers have been asked to raise the level of corporate governance and identify all relevant risk and promote a sound risk management culture,” IRDAI said.
The Reserve Bank of India (RBI) had last year named State Bank of India (SBI), ICICI Bank and HDFC Bank as Domestic Systemically Important Banks (D-SIBs), which in other words mean banks that are too big to fail. As per the RBI norms, these banks will have to set aside more capital for their continued operation.
The insurance regulator said D-SIIs refer to insurers of such size, market importance and domestic and global inter connectedness whose distress or failure would cause a significant dislocation in the domestic financial system. “Therefore, the continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy. D-SIIs are perceived as insurers that are ‘too big or too important to fail’” it said.
This perception and the perceived expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in future. These considerations require that D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues, IRDAI said.
In order to identify such insurers and to put such insurers to enhanced monitoring mechanism, IRDAI developed a methodology for identification and supervision of D-SIIs. The parameters, as per the methodology for identification of D-SIIs include the size of operations in terms of total revenue, including premium underwritten and the value of assets under management, global activities across more than one jurisdiction, lack of substitutability of their products and/or operations and interconnectedness through counterparty exposure and macro-economic exposure. “These parameters were assigned weights to cover various aspects of their operations. The Authority would identify D-SIIs on an annual basis and disclose the names of these insurers for public information,” it said.
“Given the nature of their operations and the systemic importance of the D-SIIs, these insurers have been asked to raise the level of corporate governance and identify all relevant risk and promote a sound risk management culture. D-SIIs will also be subjected to enhanced regulatory supervision,” IRDAI said.
“All the decisions regarding listing of LIC shares are taken by DIPAM, Ministry of Finance. During the last FY 2019-20, our market share as of March was 68.92 per cent and as of July 2020, the market share in FYPI (first year premium income) was 71.49 per cent which shows an increase of 257 basis points,” LIC MD Vipin Anand said in an interview recently. GIC Re registered a net loss of Rs 3.5909 billion in FY 2020 as compared to a net profit of Rs 22.2431 billion in FY19 as it took a heavy beating in the December quarter. For the full year, the gross premium income grew 15.35 per cent to Rs 510.3013 billion from Rs 442.38 billion in FY19. For the full fiscal, New India Assurance registered a net profit of Rs 14.1775 billion in 2019-20 as against Rs 5.7979 billion in the previous fiscal. Its total income in 2019-20 rose to Rs 280.4656 billion from Rs 252.7238 billion a year ago.
Source: https://indianexpress.com
* Shareholder’s equity NA: not available
India’s insurance sector may go global soon
NRIs and PIOs may soon buy life insurance policies for themselves and their family members based in India and abroad from companies set up in the IFSC.
In an effort to promote India’s underperforming insurance sector, the International Financial Services Centres Authority (IFSCA) Expert Committee has recommended boosting international insurance activity under the IFSC. According to the recommendations, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) may soon buy life insurance policies for themselves and their family members based in India and abroad from companies set up in the IFSC. Also, they can pay the premium in the currency of their choice, said a statement by the Ministry of Finance. After returning to India, NRIs and PIOs can buy portable life insurance policies that offer flexibility to pay the premium in INR or in foreign currency. It has further been recommended to allow Indian residents to buy overseas health insurance for themselves and their dependents from insurance companies or intermediaries in the IFSC for medical treatment anywhere in the world. The recommendations also have a provision of allowing insurance companies in the IFSC to offer personal accident cover, baggage loss, documents loss cover, and travel health insurance anywhere in the world. While it is advised to encourage foreign reinsurance brokers to set up base in IFSC to create a vibrant insurance market, it is believed that IFSC can emerge as an aviation insurance hub for the world. The Expert Committee believed that the IFSC can become an engine of economic growth for India as there is an immense global opportunity for the insurance sector. The Indian insurance sector is underperforming compared to that of developed and emerging economies and insurance penetration and density are especially low in India, it added. Pradip Shah, Chairman of the Expert Committee said that Gujarat International Finance Tec-City (GIFT) IFSC promises to offer a cost-effective and tax-efficient jurisdiction for insurance companies to set up operations there. Meanwhile, the Committee was constituted by the IFSCA to make recommendations on promoting international retail business in International Financial Services Centre (IFSC). The Committee was expected to provide a roadmap for the future growth of international retail business in IFSC.
Source: https://www.financialexpress.com
COVID-19 highlights need for expanded parametric insurance solutions
The COVID-19 crisis has highlighted the need for new parametric insurance products for both traditional and new risks, according to a report by insurance group InsTech London. Parametric insurance has the potential to deliver on the promise of insurtech and fill gaps in insurance protection for individuals, SMEs and corporates worldwide, according to InsTech London’s Parametric Insurance – 2021 outlook and the companies to watch report.
In 2019, there was about $140 billion in economic losses from man-made and natural disasters, according to an estimate. Traditional insurance covered only about $56 billion, or 40%, of that amount. With the increasing risk from climate change and denser populations, losses will continue to rise, InsTech London said. Without a new approach to conventional insurance, coverage for most of these costs will still not be recovered by those affected.
“Parametric insurance is one of the top 10 themes that we are focusing on,” said Matthew Grant, partner at InsTech London. “We’ve been watching this market develop, and the companies that are really making a difference, for over 20 years. The industry is now at a point where the data and technology are available at a cost that makes it accessible for new companies – or existing ones – to enter this space and help solve the problem of the uninsured and uninsurable.”
With technology now able to deliver coverage based on real-time data reporting, parametric insurance can succeed where conventional insurance has failed, InsTech London said. Parametric cover is now being considered across a wide range of risks, including earthquakes, hurricanes and flood. Triggers include shake density, wind speed, and water depth or rainfall, InsTech London said. Some of the largest reinsurance organizations, are structuring parametric placements, while new companies are emerging and finding customers and investors both within and outside the insurance sector.
“Parametric insurance has now found its place at the risk transfer table, where it will fill some of the gaps left by traditional insurance solutions,” InsTech London said.
Source: https://www.insurancebusinessmag.com
Small businesses will have to wait several more months to discover if their insurance will pay out for coronavirus disruption, after insurers and the UK regulator indicated they would take disputed claims all the way to the Supreme Court. At a High Court hearing, to determine how an initial ruling by judges should be implemented in practice, lawyers for the Financial Conduct Authority — which brought the initial test case — and two policyholder action groups won clarifications on their right to claim. However, legal experts concluded that even the apparent resolution of contested policy wordings would now be argued for a second time in an appeals process. Although this process will be “leapfrogged” straight to the UK’s final court of appeal, it is unlikely to be concluded until sometime next year. “The High Court has given its view on how its decisions should be applied but that doesn’t prevent insurers fundamentally disagreeing with what it said,” explained Ravi Nayer, a partner at law firm Brown Rudnick who is not directly involved in the case. “So this didn’t resolve any of those fundamental questions. That previous judgment has now been clarified but it might be overturned in the Supreme Court.” Insurers and the FCA now have a month to decide if they will appeal. But policyholder action groups warned that this further delay, and another lengthy court action, would put many more small businesses at risk of collapse. Sonia Campbell, a partner at law firm Mishcon de Reya representing bars and restaurants that are members of the Hospitality Insurance Group Action said: “Rather than agreeing to abide by the court’s judgment and now pay claims, it is disgraceful that insurers continue to drag their feet and watch more and more of their own policyholders go to the wall.”
The FCA has urged insurers to make payouts where there is legal clarity on policy wordings. But Mr Nayer said: “Those insurers that will pay out have already paid out. Those that are not paying will continue not to pay.” In a statement, the FCA said: “In light of the hearing, the FCA will review the final declarations and decide on its next steps. These will include pressing on with the application to appeal to the Supreme Court while continuing discussions with insurers and action groups to find a solution that avoids the need for appeal and enables payouts on eligible claims as quickly as possible.” However, some businesses gained clarification that the downturn in their income after Prime Minister Boris Johnson announced a national lockdown should not be considered an underlying “trend” in their revenues when assessing claims. “This is very helpful for businesses that did shut when told to by the prime minister — it is very, very important,” said Richard Leedham, the Mishcon de Reya lawyer representing the Hiscox Action Group. He added that the judges’ ruling that lockdown restrictions had prevented certain Hiscox policyholders from using their premises was also a good outcome. Hiscox had previously suggested they did not have to close, which meant two-thirds of policyholders did not have a claim. A spokesperson for Hiscox said: “We now await the final declarations from the court. Once we have received them we will communicate an update on the industry test case directly to relevant policyholders.” Two of the insurers involved in the case, Zurich and Ecclesiastical, have already decided not to appeal. The judges on Friday threw out a late attempt by QIC Europe to intervene in the case. QIC Europe was not part of the original High Court proceedings, but some of its policies have similar wordings to those sold by RSA, which was involved. QIC Europe wanted to be able to appeal against the High Court’s decision on those wordings if RSA decided not to. The FCA objected to QIC Europe’s attempt to become involved in the case.
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