Amid rising incidences of natural disasters, national reinsurer GIC Re has proposed to set up a natural catastrophe disaster fund/pool to cover the country’s entire population for a minimum specified amount in the event of specified natural calamities.
“We are now working on a plan to develop a natural catastrophe disaster fund/pool,” GIC Re Chairman and Managing Director A K Roy told PTI.
This would mean that effectively the insurance industry is ready to launch a standalone catastrophic cover which was earlier a part of fire and property cover.
The country has seen many major natural catastrophes since the 2005 Mumbai floods. There were flash floods in Uttarakhand and cyclone Phailin last year, and the Kashmir Valley floods and cyclone Hudhud wreaked havoc this year.
“Our 5,700-km-long coastal line and many major cities on the coast means that cyclone can hit cities like Mumbai, Jamnagar, Kochi, Chennai and Kolkata,” Roy said.
Standard cover
The standard cover will have a fixed cover for certain amount with a minimum premium and will be underwritten by the general insurance companies but ultimately will be transferred to the proposed pool. Normally, claims from natural disasters are of large amount.
GIC Re has the expertise of managing the terrorism pool effectively and the same would be applied for supervising the proposed catastrophic pool.
A host of global reinsurers like Swiss Re, Munich Re and SCOR have evinced interest in participating in the pool, he said.
The Insurance Regulatory and Development Authority has also underlined the urgent need for a separate catastrophe insurance.
“Eventually, we need to have a deeper insurance for these things as catastrophic incidents are recurring in many parts of the country. We may look at having a separate catastrophe insurance as an option,” IRDA Chairman T S Vijayan had told media in Mumbai recently.
IRDA sources said that the regulator is talking to general insurers on how to design a standard cover for compensating against natural disasters.
Originally it was proposed that the cover size will be of Rs 1 lakh and the premium can be as small as Rs 100-200 so that it can be bought by large section of people irrespective of the economic background.
“If the catastrophe pool is set up, it would help insurance industry create/enhance catastrophic loss absorption by the industry,” General Insurance Council Secretary General R Chandrasekharan said.