Bajaj Allianz General Insurance - Incredible India - Property Insurance James Amberson, Global Risks Division 14 October 2014
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Bajaj Allianz General Insurance Incredible India – Property Insurance James Amberson, Global Risks Division 14 October 2014
Table of Contents
Bajaj Allianz General Insurance
Joint venture between Bajaj Finserv Limited
and Allianz SE.
Headquartered in Pune with a countrywide
network of over 200 branches spread
across the length and breadth of the
country
Offers technical excellence in all areas of
General Insurance as well as Risk
Management across all segments of the
industry Premium & Profit (INR billion)
50
45
40
35
30
Premium
25
20 Profit
15
10
5 Claims Network
0
2009-10 2010-11 2011-12 2012-13 2013-14 3
Global Risks Division
Virtual Allianz Global Corporate & Specialty
office in India
Launch in 2013 in Pune Head Office as a
collaboration between Bajaj Allianz and AGCS
Focus on development of International
Corporate Business in India with reinsurance
support from AGCS
Part of the Singapore managed Asian Region
Our Team
James Amberson – Head of Global Risks
Division
Annam R – Head of Property
Mudassir Khalil – Head of Financial Lines
Sahil Chadha – IIS Practice Leader
Sanjay Unny – Global Client Unit Manager
Khozema Filmwala – Account Technician
4
Non-life Insurance Market
India-top priority emerging market post
Liberalization in 2000
General Insurance growth has kept pace
with the GDP growth in the country
Compounded annual growth rate
(CAGR) 17.6 percent in 10 years
Penetration remaining stable in the
range of 0.55% to 0.75% over the last
10 years
Market size Euro 9.52 Billion
Net profit Euro 420 Million in 2012-13 Public - Private Sector Split*
27 Non-life Insurers- 6 Public, 21
Private
GIC -National Reinsurer Public
FDI Limit current 26%, proposed 43% Private
increase to 49% 57%
8099 Insurance Offices across the
country
5
Non-life Insurance Market
Market Background Regulatory Requirement/Initiatives
Scope of Distribution Channel ‘Cash before cover’
enlarged Solvency margin 1.5x
Agency & Direct are Common Insurance repositories and
modes of distribution electronic issuance of policies in
Insurance Broking community is April, 2011
just over a decade old ‘Place of Business’ gazette on
Detarification boosted broker 2013, new regulation for insurers
market share in Corporate Sector to open offices
There are 300 Licensed brokers in Grievance redressal and consumer
the market now awareness initiatives
Brokers’ direct market share of Monitoring Investments by
total non-life premium has grown insurers
from 16% in 2009-10 to 23.3% in Financial reporting & Data
2012-13 Standard regulation
The IRDA (Insurance Brokers) Anti Money Laundering
Regulations, 2013 came into effect (AML)/Know Your Customer(KYC)
from 10th December, 2013 regulations
6
Property Segment
Governed by All India Fire Tariff –laid
down Terms of coverage, Rates and
Conditions for decades
Profitable portfolio until Tariff
Fire policy renamed as “Standard Fire
and Special perils Policy” in 2001
Freedom of Pricing since 2007
Base wording unchanged
To file & use ‘add-ons’ covers bridge the
gap in local policy coverage with
International Standards
Business Interruption cover not much
opted Split of Business*
Coverage of underlying risk increased 12.19% 10.26% Property
due to price reduction 0.69% 4.44% Marine
Motor
Natural Catastrophe exposed 22.05%
Engineering
Valuation impacted by fluctuating Liability
FOREX Personal Accident
Health
42.91%
2.24% Aviation
Miscellaneous
7
1.63%
3.59%
Property Segment Premium Growth in 5 year
Market size Euro 985 million 10000 (in Million Euro)
Growth rate 15-22% 8000
4,160,000 NOPs in 2013-14 6000
NIC ratio 52.46% for Private 4000
71.55% for Public
2000
24% of the business through
0
Broker 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Broker remuneration 12.5% Property Overall Market
Large risk 6.25%
Property-Combined Market
Capacity in EURO
On shore property EURO 1 Billion
Construction and
engineering EURO 0.8 Billion
Onshore energy EURO 42 Million
(combined single (sum insured
limit) basis)
8
Property Segment
73% of Industry Property Premium is
contributed by 8 States of the Country
TIV for Property had gone up 11 times
from 2009-10 to 2012-13, while the
premium overall increase is hardly 1.6
times during the same period
Non-admitted policies prohibited
Sum Insured must be in INR
Language of the policy-English;
Public Sector Insurance Companies use
Bilingual-English & National Language
(Hindi)
Dispute resolution-Arbitration,
Ombudsman, Consumer Forum
Insurance clearance house for
coinsurance & reinsurance settlements
9
Thresholds
SFSP Policy IAR Policy Mega Risk Policy
Industrial all risk (IAR) -Reinsurance driven
Standard Fire and Special Wordings & pricing.
-all risks s.t Exclusions
Perils Policy- -unique benefit -Complete freedom for
Standalone policy of reinstatement value terms
even on total loss, -TIV (PD+BI)>
-TIV (PD+BI)< Euro 6mio Euro 300 mio
-Coverage and with broad property
definitions. - Coverage
-PD and BI separate -TIV (PD+BI)> 1) PD
-Deductible Euro 6mio at one location 2) MBD
-Coverage: 3) BI
5% of the claim amount
Section I - PD -Deductible
s.t. m of EUR 120 – 300 5% of the claim amount
Section II - BI (MLOP
Optional) s.t. m of EUR 60000
-Deductible
5% of the claim amount
s.t. m of EUR 300 – 30000
10UW Specific Regulation
Statutory Cession to GIC on each and every policy
underwritten
-GIC is the sole reinsurer of the domestic reinsurance market
-5% of sum insured is subject to a obligatory cap of Euro 62.50
million on sum insured per risk for fire,
GIC Re’s capacity for Property Business for Treaty and
Facultative basis :
Class Capacity
Domestic Business Euro 187.50 mio. Any one risk
International Clientele On PML Basis Sum Insured
Facultative Euro 15 mio Euro 38 mio
Treaty Euro 3 mio Euro 7.6 mio
Terrorism Pool- Managed by GIC- Combined limit for Property up
to Euro 117.5 million per location / compound
Insurance Premium is charged with 12.36% Service Tax
11UW Specific Regulation
REINSURANCE
Intend to Maximize retention within the country
To Develop adequate capacity
To Secure the best possible protection for the reinsc cost incurred
GIC Re is the national Reinsurer
A reinsurer should have a minimum credit rating of BBB ( S&P ) or an
equivalent for facultative reinsurance.
Limits allowed based on rating is as follows:
Rating of Reinsurers (as per Standard & Poor
and applicable to other equivalent Limit of cession allowed under Regulation 3(11)
• BBB of Standard & Poor 10%
• Greater than BBB and upto & including AA
of Standard & Poor 15%
•Greater than AA upto & including AAA of
Standard & Poor 20%
Cross border reinsures guidelines w.e.f. April 2012 by Regulation
Many global reinsurers like Swiss Re , Munich Re , Hannover Re have
representative office in India ( But not registered reinsurers )Claims Practice
Irda licensed surveyor for claims above Euro 250
In-house surveyor not used in Property as the onus of neutrality and
professionalism could be lost both in perception as well in the legal sense as
the Insurance Act would imply
The onus of proving that the loss is covered and payable is generally on
the insured in named peril policies
The onus that the policy does not cover the loss is on the insurer
interim payment in large claims to give cash infusion to the devastated
insured
If the technical violations result in exposing a real reason that a claim is not
payable, then the claim is to be repudiated
Repudiation may also involve more complex matters such as issues of non-
disclosure, misrepresentation and fraud.
Companies utilize the services of Tech Experts, Forensic, Fire Bridge and
detective agencies for understanding/probing the genuineness of claims
New concepts include treating customers fairly (TCF)
E-payment of claims
Fraud management
13Claims Specific Regulation
The Insurance Act stipulates all claims over Euro 250 should be
surveyed by a IRDA licensed surveyor
Earliest notice of claim by insured
Appointment of surveyor within 72 hours from intimation
Surveyors/Loss assessors are subject to ‘Code of Conduct’
Insurer to offer settlement/repudiation within 30 days on receipt of
survey report
Payment to be made within 7 days of acceptance of offer
Insurer and surveyor should seek from the insured only those
documents that are relevant to the duties of the insured
Surveyor to comment the grounds for repudiation if the claim is
found to be that
Surveyor to obtain a certificate of consent/ satisfaction about the
settlement of the claim from the insured
Surveyor to take expert opinion, if required
Surveyor to comment about the salvage realization efforts.
14General Regulations
Consumer/policyholder rights.
Right to proper
information and advice
Right to suitability of
products
Right to fair terms
Right to fair treatment
Right to redressal of
grievances and disputes
15NatCat Exposure
NATCAT ZONES-Hazard Vulnerability in India
Indian Subcontinent: among the world's most disaster prone areas
59% of land vulnerable to Earthquakes
8.5% of land vulnerable to Cyclones
5% of land vulnerable to Floods
> 1 million houses damaged annually + human, social, other losses
16NatCat Exposure
*1998 Gujarat Cyclone Natural Disasters from 1980 - 2010
500 million USD economic loss (250 million Overview
insured loss), No of events: 431
No of people killed: 143,039
*1999 Orissa Super Cyclone No of people affected: 1,521,726,127
2.5 billion USD economic loss (100 million Average affected per year: 49,087,940
insured loss), Economic Damage (Eur X 1,000): 36,972,177
Economic Damage per year (Eur X 1,000): 1,192,651
*2001 Gujarat (Bhuj) 7.7 Mw Earthquake
4.0 billion USD economic loss,
*2004 Sumatra Andaman 9.2 Earthquake
and Tsunami
1.0 billion USD economic loss (India),
16,000+ deaths (India)
*Sikkim 2011
Expected Economic Loss : US$ 22.3 billion
Magnitude 6.9 Mm
17NatCat Exposure
Vulnerability Atlas-Earthquake
10.9% land is liable to severe
earthquakes (intensity MSK IX or
more) ·
17.3%landis liable to
MSKVIII(similar to Latur/
Uttarkashi)
30.4% land is liable to MSK VII
(similar to Jabalpur quake)
Biggest quakes in: Andamans, Kutch,
Himachal, Kashmir, N. Bihar and the
North
East
18NatCat Exposure
Vulnerability Atlas-Flood
Floods · Floods in the Indo-
Gangetic-Brahmaputra plain are an
annual feature
Major Floods List:
Jammu & Kashmir Floods 2014
Uttarakhand Flash Flood 2013
Himalayan Flash Flood 2012
Brahmaputra Floods 2012
Ladakh Floods 2010
Orissa Floods 2009, Kerala, Karnataka, North -East
Bihar Floods, 2008
Gujarat Floods 2005
Mumbai Floods 2005
Chennai Floods 2005
Bihar Floods, 2004
19NatCat Exposure
Vulnerability Atlas- Wind and
Cyclones
1877-2005: 283 cyclones (106
severe) in a 50 km wide strip on
the East Coast
Less severe cyclonic activity on
West Coast (35 cyclones in the
same period)
In 19 severe cyclonic storms,
death toll> 10,000 lives
In 21 cyclones in Bay of Bengal
(lndia+Bangladesh) 1.25 million
lives have
been lost
20Special Economic Zones
A designated duty free enclave to be treated as foreign territory
Domestic sales subject to full customs duty
Duty free import/domestic procurement of goods
100% Income Tax exemption on export income
Exemption from Central Sales Tax
Exemption from Service Tax
Impact during claim
Re-import may cause duty/taxes
Removal of damaged items out side the Zone requires duty/tax
payment
Duty/Tax to be taken care in Insured Value
21FEMA Regulation
FEMA-FOREIGN EXCHANGE (INSURANCE) MANAGEMENT REGULATIONS
PART A - GENERAL INSURANCE
15A.1 Persons, firms, companies, etc. resident in India are not permitted to
take general insurance of any kind with insurance companies in foreign
countries without prior approval of Reserve Bank.
Besides, permission of Government of India under General Insurance
Business (Nationalization) Act, 1972, is also required in such cases. Proposals
for direct insurance outside India should be submitted to Reserve Bank
explaining reasons for seeking such insurance cover and producing a
certificate issued by GIC or any of its subsidiaries to the effect that the
proposed insurance cover cannot be obtained from them.
22Fluctuating FOREX (INR versus EUR)
Valuation of assets should factor the volatility in the rupee exchange rate.
23DIC and Tax
European manufacturer
Global policy covering HQ and Overseas locations including India
Fire at warehouse in India
Two payments under the claim
Euro 7.69 million to India Branch
Euro 15.38 million to HQ under DIC/DIL
Indian Tax authorities levied tax on Euro 15.38 million
Any claim for the loss in India is taxable in the country
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