It is time that IRDA and Indian non - life industry review and looks at alternate risk financing

With increasing events and claims how do you see the disaster management scenario including increasing terrorism events from the insurers point of view?
Disaster management has a key role in limiting losses and the establishment of a Natural Disaster authority is a step in right direction. The uncertainty and insecurity about one's life and possessions have increased manifold in recent times and the threat perceptions as a consequence. It is therefore important from the customer's perspective to guard against the unforeseen - be it natural disasters or man-made events like terror attacks - and as an insurer we are gearing up to offer a suitable cover against disaster.

How do you see the customers awareness in these areas? Are the insured attaching importance and ready to buy these covers now?
The spate of terror attacks all over the country have led to an increased sense of awareness among customers and more so following the attacks in Mumbai. Consequently, there has  also been a marked increase in number of enquiries to buy these covers.

Has global movement on climate change had any impact on the Indian insurance industry and its customer?
Climate change has contributed to an increase in cyclone activities and the losses arising out of them. There have been unusually unseasonal heavy rains and the resulting inundation. The perception and analysis of such natural and catastrophic events have undergone a sea change. Consequently, there has been a change in risk modeling practices and perception of the reinsurers, who would in turn price differently the reinsurance covers which will have an impact on direct insurance.

Are the risk management practices  you follow for underwriting policies relating to manmade and natural catastrophe need to be upgraded now?
Yes and we are in the process of upgrading these practices. This would include rate revision, tightening of terms and conditions, adequate back to back reinsurance protection and loss prevention measures like insisting on proper security measures etc.

Are you getting ready with more green insurance products and services?
If the reference to green insurance products and services alludes to new and innovative products, the answer is yes. The industry has a role in devising suitable covers to take care of such risks and even a 'stand alone terror cover' may become a reality in near future.

After a spate of terrorism events including the dastardly Mumbai event, will you be more prudent in underwriting your terrorism policy?
Even much prior to events of 26/11, following 9/11, the Indian Insurance Industry had come together and devised a 'Terrorism Pool'. This pool is adequately funded to meet losses arising out of the terrible events in Mumbai. The underwriting committee of the pool will come together to discuss the recent developments and examine the need for any revision in terrorism coverage, norms, conditions etc.

Should Indian insurance industry collectively fund cat mapping?
This is a good idea and worthy of being taken up at the General Insurance Council or IRDA meeting. Reputed reinsurers like Munich Re have indicated that they are keen in associating with Indian Non-life companies and the government to carry out comprehensive data analysis and CAT mapping and modeling.

Are you getting adequate reinsurance support for catastrophic events? 
 Yes, we are getting adequate reinsurance support. Every year our live policy data is analyzed and based on the outcome of modeling exercises on that data base, we decide on purchase of Cat covers from the reinsurance market.

Do you think Government should provide financial support to set up larger natural disaster and terrorism pool?
One of the ideas is for the non-life companies to set aside a percentage of premium income towards reserve for such Cat events. The government can support such proposals through appropriate tax relief.
Government as a partner in the event of losses exceeding certain loss levels arising from Cat events or terror attacks is also worth considering.
The government can also fund by way of suitable tax or levy ( Terror surcharge). In fact, the fund can also be used to modernize and revolutionize the entire security apparatus, thus preventing such attacks in the first place.

Is the time right for IRDA to launch instruments for linking catastrophic finance with that of capital markets?
Insurance linked securities or CAT Bonds are common in developed markets such as U.S. and Japan. It is time that IRDA and Indian Non-life Industry review and looks at such alternate risk financing, by which there could be direct capital market participation in providing the much needed capacity for such events.