A PROJECT REPORT ON

Published on December 2016 | Categories: Documents | Downloads: 53 | Comments: 0 | Views: 617
of 44
Download PDF   Embed   Report

Comments

Content

A PROJECT REPORT ON “CATASTROPHE INSURANCE”

SUBMITTED BY ANILA M NAIR THIRD YEAR (BANKING AND INSURANCE) SEMESTER VI 2010-11

MODEL COLLEGE DOMBIVLI UNIVERSITY OF MUMBAI MARCH – 2011

1

A PROJECT REPORT ON “CATASTROPHE INSURANCE”

SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF COMMERCE (BANKING & INSURANCE) VI SEMESTER

BY ANILA M NAIR MODEL COLLEGE DOMBIVLI MARCH - 2011

2

DECLARATION

I, ANILA M NAIR, student of B.com (Banking & Insurance) V semester of Model College Dombivli (east), here by declare that, I have completed this project on “CATASTROPHE INSUARNCE” for the academic year 2010 – 2011.

The information submitted is true and original to the best of my knowledge.

ANILA M NAIR T.Y. (Banking & Insurance)

3

ACKNOWLEDGEMENT

I would like to extend my sincere gratitude to all those people who have helped me in the successful completion of my project entitled “CATASTROPHE INSURANCE”. First and foremost I would like to thank my project guide Miss SEETHALAKSHMI madam for being kind enough in spending her time from her busy schedule and helping me in collecting the necessary data. Also I owe my sincere gratitude to branch manager of NEW INDIA, whose dynamic and positive approach gave an effective momentum to my project. I would also like to express my sincere thanks to our principle, Dr. M.R.Nair for his constant moral support and vision. This project could not have been possible without the help of the entire library department of our college. They made as much data, books, magazines etc. available as they can to facilitate the easy collection of information.

ANILA M NAIR T.Y. (Banking & Insurance)

4

TABLE OF CONTENTS

SR. NO.

DESCRIPTION

PAGE NO.

1.  CERTIFICATE 2. 3. 4. 5. 6.  DECLARATION  ACKNOWLEDGEMENT  ABBREVIATION  FIGURES & CHARTS  CHAPTER I INTRODUCTION  CHAPTER II NEW INDIA – A PROFILE  CHAPTER III THEORETICAL VIEW  CHAPTER IV 9. CATASTROPHE INSURANCE – A CASE STUDY 10. 11. 12.  CHAPTER V CONCLUSION  BIBLIOGRAPHY  ANNEXURE

I II III IV V 1-5

7.

6-13

8.

14-20

21-24

25

26 27

5

6

LIST OF FIGURES AND CHARTS

SR NO.

PARTICULARS

PAGE NO.

1.

MAP OF BRANCHES

13

7

LIST OF ABBREVIATIONS

ABBREVIATION

EXPANSION

TAC

TARIFF ADVISORY COMMITTEE

GIC

GENERAL INSURANCE CORPORATION OF INDIA

IRDA

INSURANCE REGULATORY DEVELOPMENT AUTHORITY

CAT

CATASTROPHE

8

CHAPTER – 1 AN INTRODUCTION

9

CHAPTER – 2 PROFILE OF NEW INDIA ASSURANCE

10

CHAPTER – 3 THEORETICAL VIEW

CHAPTER – 4
11

CATASTROPHE INSURANCE -a CASE STUDY

CHAPTER – 5

12

CONCLUSION

13

CHAPTER1 AN INTRODUCTION

Insurance is a co-operative device of distributing losses, falling on an individual or his family over a large number of persons, each bearing a nominal expenditure and feeling secure against heavy loss.

The tragic and unforeseen evenly of catastrophe causes multiple losses to society such as a loss of life, destruction of property, loss of revenue, and additional expenses. Due to dislocation of such things, consequential losses occur such loss of business, nonavailability of social facilities. The society expects that insurers should provide quick and effective indemnity of such losses. Insurance industry proactively support the economic recovery process.

14

The insurer should manage the crises through insurance schemes by coordinating with the insurance councils, by quick survey and assessment of losses, develop response system and educate the policy-holders and general public against the catastrophe losses. The insurers should and educate the policy-holders and general public against the catastrophe losses. The insures should coordinate the loss compensation process through the general council by taking the help of police, hospital and government machineries. The insurers after occurring of catastrophe should try to contract the beneficiaries at the earliest possible. They should through surveyors try to compensate the losses as quickly as possible on humanitarian grounds. The insurers and not the insured should take the responsibilities of verification and assessment of loss through photographs, newspaper, radio and televisions. Insurers should waive documents other than essential ones in settlement of claims, work with other insurers and all other authorities in quick settlement of claims, allows disposal of salvage and settlements of other dues.

The catastrophe is unforeseen and unpredictable but it brings fury and ferocity to human life and property. The destruction is unimaginable. The resultant losses of life, property and other will take long time to recompensate. There is need of insuring and losses. The insurers have to be very careful in designing suitable product at a reasonable price. The insurers and government should educate people of the serious consequences of catastrophe e.g. floods, earthquake and tsunamis. India is prone to serious socio-economic consequences and natural calamities. In India, Tariff Advisory Committee (TAC) is guiding fire insurance to protect catastrophe losses. Riot, strike and terrorism perils are the high profile of social risks. The risks of flood, earthquake and

15

convulsions are caused by nature. Therefore they are natural catastrophe. The catastrophe insurance covers social risks (such as, riots, strikes, terrorism, perils) and natural risks (such as flood, earthquake and tsunami etc).

ABOUT THE REPORT

• TITLE OF THE STUDY:

The present study is titled as “A PROJECT REPORT ON CATASTROPHE INSURANCE - A CASE STUDY”. The study is made with special reference to New India Assurance company

• OBJECTIVES

OF THE STUDY:

The following are the objectives of the present study:

1.

The main objective of doing this project is to study the

corporate culture
16

2. To analyze the need for catastrophe insurance

3. To analyze the various ways to cover catastrophe risks

4. To gain knowledge about various catastrophe risk

• DATA

AND METHODOLOGY:

For the purpose of the present study both primary and Secondary data were used.

PRIMARY DATA: Primary data collected from bank visits,
interviewing with staff etc.

SECONDARY DATA: Secondary data collected from books,
websites and newspaper.

• LIMITATION OF THE STUDY:

The present study has got all the limitations of case study method of data collection.

17



Chapter Layout :

Chapter

Particulars

1 2 3 4

Introduction to the title and the project Profile of NEW INDIA ASSURANCE Theoretical view of home loans Analysis of the study

5

Conclusion to the project

18

Chapter 2 New India Assurance –A Profile

New India Assurance is currently the largest insurance Company in India based in Mumbai. It is one of the five public sector insurance companies in India. It was founded by Dorab Tata in 1919.It was nationalized in 1973. Previously it was a subsidiary of the General insurance corporation of India (GIC). But as GIC became an reinsurance company as per IRDA Act 1999, all of its four primary insurance subsidiaries (New India Assurance, United India Insurance, Oriental Insurance and National Insurance) got autonomy. New India Assurance has been operating both in India and foreign countries. In the recent past it has succeeded in forging tie-ups with some of the leading public sector banks in India such as State

19

Bank of India, Central Bank of India, Corporation Bank and United Western Bank to increase its distribution network.

New India is the first fully Indian owned insurance company in India. New India is a pioneer among the Indian Companies on various fronts, right from insuring the first domestic airlines in 1946 to satellite insurance in 1980.With a wide range of policies New India has become one of the largest non-life insurance companies, not only in India, but also in the Afro-Asian region.

New India Assurance Company is a leading global insurance group, with offices and branches throughout India and various countries abroad. The company services the Indian subcontinent with a network of 1068 offices, comprising 26 Regional offices, 393 Divisional offices and 648 branches. With approximately 21000 employees, New India has the largest number of specialist and technically qualified personnel at all levels of management, who are empowered to underwrite and settle claims of high magnitude. New India has been rated "A-" (Excellent) by A.M.Best Co., making it the only Indian insurance company to have been rated by an international rating agency. Rating based on following factors: • Superior Capital Position • Strong Operating Performance Only Company to develop significant International operations, long record of successful trading outside India. Shri M. D. Mallaya, Chairman & Managing Director, Bank of Baroda, has been appointed as Director The New India Assurance Company limited.

Since its inception in 1994, has emerged as TATA Financial Services Inc. One of India's leading financial managing assets of a large investor base. The fund offers a range of investment options,
20

which include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. New India Assurance Company Limited follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the company's management, sustainability of its business model and its competitive position, amongst other factors TATA Financial Services Inc.Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in.

TATA Financial Services Inc.Strives to provide transparent, ethical and research-based investments and wealth management services. International presence Overseas operations commenced in 1920. Operations in 24 countries in the year 2004-05. Network of 19 Branches, 12 Agencies, 2 Associate companies and 2 Subsidiary companies in the year 2004-05. Overseas Premium of Rs.892.35 cores in the year 2004-05, which accounts for more than 80% of totaloverseas premium in India.

Company Strengths

Largest number of Offices - In India and Abroad Trained and technically qualified staff 1068 fully computerized offices across India. "A-" (Excellent) rating by A.M.Best & Co (Europe) First domestic company to be rated by an International Rating Agency Rating based upon following factors: Superior capital position Strong operating performance Strong market position Only company to develop significant International operations, long record of successful trading outside India

21

Pioneers
• First company to set up an Aviation Insurance Department in 1946. • First company to handle the Hull Insurance requirements of the Indian Shipping Fleet. • First company to establish its own Training School. • First company to introduce the concept of 'Model Office Training'. • First company to create department in Engineering insurance.

Vision
To be the most trusted name in investment and wealth management, to be the preferred employer in the industry and to be a catalyst for growth and excellence of the asset management business in India. The vision is to make assurance Company the dominant new insurer in the life insurance industry. This it hopes to achieve through our commitment to excellence, focus on service, speed and innovation, and leveraging our technological expertise. The success of this organization will be founded on its strong focus on values and clarity of purpose. These include: • Understanding the needs of customers and offering them superior products and • To be the first choice insurer for customers • To be the preferred employer for staff in the insurance industry. • To be the number one insurer for creating shareholder value. • Leveraging technology to service customers quickly, efficiently and conveniently

22

GOAL- THE PHILOSOPHICAL GOAL.
The assurance Company collects money in the form of premium from individuals (A, B, C & D). The money collected from people is used to meet one person's calamity. The assurance Company enters into the process of canalizing by disbursing the amount collected into the command economy. Thus a significant part of the activities of the insurance industry of an economy entails mobilization of domestic savings and its subsequent disbursal to investors. The main risk faced by the assurance company is when all the Assurors claim for the reimbursement at the same time. This situation is very rare to occur, and is one of the major threat that the assurance company faces in its business operations.To provide financial security to individuals, trade, commerce and all other segments of the society by offering insurance products and services of high quality at affordable. To consistently pursue investor's wealth optimization by achieving superior and consistent investment results. To develop general insurance Business in thebest interest. Creating a conducive environment to hone and retain talent. 1 Providing customer delight. 2 Institutionalizing system-approach in all aspects of functioning. 3 Upholding highest standards of ethical values at all times.

Values
1 Highest priority to customer needs 2 High standards of public conduct 3 Transparency in operations.

History- History of The New India Assurance Company Limited-

23

Incorporated on July 23rd, 1919 Founded by Sir Dorab Tata in 1919, New India is the first fully Indian owned insurance company in India. New India was a pioneer among the Indian Companies on various fronts, right from insuring the first domestic airlines in 1946 to satellite insurance in 1980. The latest addition to the list of firsts is the insurance of the INSAT-2E. With a wide range of policies New India has become one of the largest non-life insurance companies, not only in India, but also in the Afro-Asian region. These consisted of LIC, GIC and public-sector bank backed Indian mutual funds. SBI Mutual fund was the first of this kind. 1981 saw the entry of private sector players on the Indian Mutual Funds scene. Mutual fund regulations were revised in 1990 to accommodate changing market needs. With the Sensex on a scorching bull rally, many investors prefer to tradeon stocks themselves. Mutual funds are more balanced since they diversify overa large number of stocks and sectors.In the rally of 2000, it was noticed that mutual funds did better than the stocks mainly due to prudent fund management based on the virtues of diversification.

First Phase – 1919-85 Stabilized
Unit Trust of India (UTI) was established on 1919 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1928 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first
24

scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management

Second Phase – (Entry of Public Sector Funds).

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase – (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry
25

has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual fund.

Fourth Phase – Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963. UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

Corporate Head office Address: The New India Assurance Co. Ltd. 87, M.G. Road, Fort, Mumbai 400 001

26

27

CHAPTER3 THEORETICAL VIEW

From the technical point of view, a sudden, violent physical manifestation usually involving natural phenomena, which causes widespread and severe loss or damage to property and/or physical injury or death and consequential losses arising from that event, is called a catastrophe. However, in the parlance of reinsurers, a catastrophe is an event that leads to any loss involving more than one risk. It can be a natural event, like, earthquake, flood, volcanic eruption, wild fire, hurricane, landslide, pandemic and winter storm or can be a man-made event like the one that affected the twin towers at New York on 9/11, industrial contamination and technological failure. These days, the definition is also being extended to man-made events such as terrorism, pandemic diseases, etc. insurance that covers such risks is collectively known as catastrophe insurance.

28

An event causing a number of individual losses due to operation of a natural peril like earthquake or flood can be termed as “natural catastrophe”. The losses due to floods, earthquake, storms, cold waves are some of the examples of natural events having the potential to cause losses of catastrophic nature. On the other hand, an event associated with human activities is normally categorised under “man-made” disaster. Events like major fire, explosions, and aviation and mining disaster are some of the examples of “man-made” events. They are otherwise termed as “technical” disasters.

Since there are various types of catastrophes, insurance covers for these events are varied. Earlier, terrorism risk was such a low probability, that no such cover was offered. But after 9/11, insurers are offering pure terrorism cover, where they have the comfort of reliable reinsurance or a backstop facility from federal governments. Terrorism cover can also come as part of a fire or other perils policy. It has been observed that most acts of terrorism have concentrated on creating maximum publicity and so, they have targeted more human beings than individual property. Even where property has been targeted, it has been high profile public or commercial property.

Some policies which include catastrophe cover are:

• Property and casualty-this includes dwelling and commercial property • Workmen’s compensation • General liability insurance • Auto insurance, etc

homeowners

and

29

The alternative is to offer it as an add-on of a more comprehensive policy.

Catastrophic losses challenge the economic role of insurance as a private wealth redistribution mechanism. Insurance makes possible the transfer of numerous risks. It is a mechanism whereby insurers collect funds from many agents exposed to similar risks, to pay for losses that will randomly affect some of these agents. The reinsurance mechanism complements direct insurance by allowing a more world-wide diversification of risks. In general, the financial capacity of the insurance industry has been able to absorb intertemporal deviations of total losses from their expected value. However, financial capacity has been outpaced by potential losses in the catastrophe lines.

Categories of catastrophes:

Catastrophes fall into two broad categories, namely, risks that have a low frequency of occurrences in terms of our annual time scale, and risks that are more common. Earthquakes, tsunamis, volcanic eruption and other convulsions of nature would fall in the first category, while windstorm, hail, floods, etc. fall in the second category. Although both are catastrophic in their effect, the methods of rating, underwriting and insuring them have to be materially different. Some of the problems in insuring and reinsuring catastrophe risks are due to the mismatch between the time scale for evolution of exposures and the accounting period. A third category of catastrophic losses relates to environmental risks, such as the Bhopal gas tragedy. Risks of losses by nuclear risks are generally not covered by insurers, presumably for the same reasons as exclusion of war risks on land.

30

Recent trends:

The severity and frequency of insured losses on account of natural disasters have significantly increased in recent years. Although it is debateable whether an increasing frequency of hurricane and floods may be attributed to climate change like global warming, the undoubted fact is that the concentration of values in catastropheprone areas has brought about an increase in the amount of damages. Natural catastrophes remain unpredictable despite technical advances. Terrorism is the main cause for man-made disasters throughout the world. It has caused losses of unprecedented magnitude in the past, even raising doubts about insurability of terrorism risks. The nature, type and severity of the past losses do not serve as a guide anymore to predict and quantify the future losses. There is also a considerable change in the demographics of risks- increase in the costs of catastrophic losses.

Factors:

The magnitude of natural disasters and total and insured losses have increased primarily because of four factors: • Global warming • Concentration of the high net worth populace and assets in high risk areas and resultant correlate risks, • Increased insurance penetration (insurance payouts for weather-related disasters even in many developing countries are three times post disaster foreign aid largesse), • Non-compliance with building and other safety measures, often a result of the moral hazard factor that ensues from government involvement in insurance.
31

Disasters –setting new benchmarks:

Generally Speaking global warming has been identified as the prime cause leading to the high intensity and frequency of calamities, so much so that global warming is sending a chill down the spine of all insurers. The natural disasters have been occurring with alarming and increasing frequency over the past two decades.

The year 2005 has been another record year for disasters, not just natural, but man-made, as well. Twenty-three storms hit the U.S. The insured losses from hurricane Katrina are $40bn to $60bn with economic losses hovering at $100bn plus, making it the most costly disaster in the history of U.S next to Hurricane Miami in 1926. This was followed by spate of disasters such as Hurricane Rita and Wilma in the US, the earthquake in Pakistan and the London and Madrid bombings, the Delhi terrorist attacks, the unusually high rainfall in Mumbai, Bangalore and Chennai, the car bomb attacks at Baghdad, the most recent Myanmar and Japan earthquakes (in 2008), the high intensity floods in Europe, China and Bihar, in India, the 2008 terrorist attacks in Jaipur, Bangalore, Ahmedabad and again Delhi. Last, but definitely not the least, the devastating September 26 Mumbai attacks, more like a martial siege than a terrorist attack that revealed audacity and ingenuity of the highest order (on the Taj and Oberoi Hotels, Leopold Café and CST Terminus, that seemed to have altered the common citizens’ attitude towards terrorism forever, thereby setting another benchmark) - it could go on and on. Each was of varying intensity, but posing one question: are Super CATs, and more so, terrorism, which deals with the human psyche and is highly unpredictable, insurable risks at all?

32

Undoubtedly, US Has been in the news more often than other countries because of various reasons. One, insurance penetration is higher there than in most other countries. Two, asset values of property, particularly coastal property located in hurricane- prone coastal areas in affluent states like Florida, are exorbitant – this escalates insured losses further. Third, documentation about both economic and total losses are more comprehensive in the US and some other developed countries then they are in the developing world, which is also regularly prone to earthquakes, floods and other catastrophes that are hitting the globe with accelerating frequency and intensity.

New generation risks:

The new generation catastrophes are in essence very difficult from natural disasters or even trends in terrorism that we saw two decades ago, as also in terms of insured and uninsured losses. A terrorist attack does not translate into, say, 20 casualties from a car bomb; rather a single mega event could lead to insurance claims under 28 lines of business or more. And natural calamities are increasingly posing correlated risk in an age of population concentration in affluent but high areas such as the sea coast, or large industrial parks situated right in the midst of megacities. Assets values such as property, household and office equipment etc; would typically be very high in these areas. Sometimes, the geographical location of a country shapes the pattern of population concentration of a country. For example, almost 80% of the Australian population lives within 50 kilometers of the sea coast of this country surrounded by the sea, which makes the people living there extremely vulnerable to natural disasters. These are the
33

social factors that end up aggravating the impact of natural calamities and distinguishing then=m from the mega catastrophes we saw, say, 50 years ago when these factors did not exist. For insurers, it is a tinderbox situation where a single calamity could affect a large number of policyholders, all or many of whom might have been insured with a single insurance company.

THE PROBLEM INSURANCE:

OF

CATASTROPHE

RISK

AND

The increased frequency and severity of the catastrophes has dramatically altered the insurance environment. Insurers and reinsurers face difficult challenges on account of increased catastrophe risk. There exists some concern on the part of the insurers as to how to handle losses of high magnitude with lowfrequency not merely from the point of view of number of claims to be handled but also from the point of view of financing and pricing such risks in future. The insurance industry started focusing more on industry capacity, reinsurance and securitization. Insurers and reinsurers find it hard to raise their prices to more adequate levels and decrease their exposure to catastrophe losses. They are forced to look for ways to diversify their exposure through reinsurance and securitization.

Insurance is a mechanism for transfer of numerous risks. It is a mechanism whereby insurers collect funds from many people exposed to similar risks, to pay for losses that will randomly affect some of them. Reinsurance mechanism complements direct
34

insurance by allowing a more worldwide diversification of risks. Catastrophe losses challenge their economic role of insurance and pave the way foe emergence of different financial products like cat bonds.

Indian market scenario – issues and challenges:

Unfortunately, a country like India has no insulation to protect itself from the losses happening elsewhere. From the above list of major losses, one can see that major loss events in terms of insured value happen in the US and Europe than in other parts of the world. The main principle of insurance is based on spreading the risk globally. The catastrophe loss of Mumbai floods in June 2005 was perceived to be a one in a hundred years event. But unfortunately it is followed by severe flood loss in 2006 in many parts of India. The initial loss estimate of the recent flood in Surat in August 2006 for the industry is estimated to be in the region of US$130mm (approximately RS.600cr). Losses of large magnitude put insurers in a dilemma in deciding how much cover to buy and retain. The insurers need to make use of stochastic models to assess the largest possible loss and also identify the worst combination of circumstances to determine the level of cover to buy.

The reinsurance commission, which is one of the major revenue items in the account of any insurance company, will face a serious threat. The companies will experience reduced commission and reduced reinsurance capacity. The reinsurance terms and

35

conditions will become more stringent which will consequently affect the direct insurance offered in the marke

CHAPTER 4 ANALYSIS OF THE COMPANY
New India Assurance is one of the most premier insurance companies in India. It was established by the House of Tata Founder member - Sir Dorab Tata on July 23rd, 1919. Then in the year 1973 this insurance company was nationalized with merger of Indiancompanies.

Ever since its inception as a small organization, New India Assurance has come a long way in the insurance sector. Today this company has gained a lot of reputation and is regarded as one of the most trusted insurance company by the people of the country. One of the most important insurance polices of the company is the Special Contingency Policy.

The Standard Fire and Special Perils Policy covers all properties on land (excluding cost of land), moveable or immoveable, at various locations against named perils. Special Types of Policies are designed for Stocks (declaration and floater), Building, Plant & Machinery keeping in mind the nature of property, proposers' requirements and basis of indemnification.

36

Long Term Policies available for Dwellings with suitable discounts in premium. Policy can be extended to cover certain additional perils and expenses at additional premium. Certain perils can be deleted with discount in premium rates. Discount in premium available for good claims experience for sum insured more than Rs. 50 crores in one location and for installation of fire extinguishing appliances.

Concept of "one risk one rate" for all properties in an Industrial or Manufacturing Complex, for administrative convenience of the proposer.

About the Special Contingency Policy

This policy is specially designed for those business concerns who want to integrate all the possible risks/damages that are related to their machineries/equipments under one single insurance policy. Under Special Contingency Policy all the losses/damages that arises due to the lightning, fire, burglary and so on are fully covered. The Premium rate of this policy generally varies from 1% to 2% of the value of the machineries/equipments to be covered.

RIOT

• The increasing incidents of riot have compelled the insurer to consider its insurance. • People in India, can get fire insurance policy plus coverage of riot at an additional premium payment. • The Causa proxima is used to decide the riot risks and its payment. • Insurers are unwilling to ensure riots risks because of its potential losses, inadequate premiums and moral hazard. • Government provided reinsurance to insurance of riot-risks. • Thus the riot insurance started since then
37

STRIKES

• Strikes are also unforeseen and causing damage to property and life and also loss of revenue. • Previously it was uninsured but now it insured under fire policy with the payment of extra premium. • The public sector companies have started insuring strike risks. • The insurance act is amended accordingly

TERRORISM RISKS

• Companies have come forward for the protection against terrorism. • They have started terrorism insurance policy under terrorism risks. • Problems of terrorism insurance are non-availability of data for proper measurement of risks, absence of information of total loss exposure and high loss potential of terrorism actions. • Insurance and reinsurance can contain terrorism risks. • Terrorism premium surcharge is levied on all property policies. • Besides terrorism insurance, fixed investment in risk securities is being practised • Multi-event securities may become a partial long-term solution for privately insuring terrorism risk.

FLOODS

38

• The cover of floods was excluded till march 2011 when it was offered on extra premium to fire policy. • The fire policy covers the flood-risks today. • If anyone does not like to get cover of floods certain discounts will be made in the usual premium rate.

EARTHQUAKE

• Fire policy as social obligation has started providing cover for earthquake on an additional premium. • It does not cover loss due to volcanic eruption or convulsions of nature. • Fire policy, now, cover flood as well as losses due to an earthquake.

HURRICANE AND WINDSTORMS

• The catastrophe losses particularly wind losses increase in future as a result of global warming. • It is for the insurance companies to come forward to insure wind losses exclusively over 26 degree C temperature of sea storm which clashes the land.

TSUNAMI

• Tsunami has proved a great threat to the public for its survival and rehabilitation. • It provides huge opportunity for insurance to enhance risk awareness of natural calamities. • Underwriting natural catastrophe risks posses serious challenges to insurers.
39

• The immeasurability, loss frequency and high severity of catastrophe risks have made insurers to decide the underwriting process and premium rate involving geology, engineering and econimics. • Insurers refine their risk estimates by collecting and assessing additional data

CHAPTER 5 CONCLUSION

Insurance companies operating in any market need to have a clear cut business strategy and underwriting policy as to geographical spread and nature of risk to be underwritten and the level and extend of reinsurance protection they should buy. The companies should also put in place a robust system to monitor and control the accumulation of their risks in a particular geographical location to avoid concentration of value exposed to disasters. Since catastrophes due to different perils like earthquake, cyclone, and flood exposed the insured values in a different way, the insurers should have the mechanism to map and monitor the values exposed separately for different perils. The government should also provide tax incentive to create catastrophe funds by the insurance companies. In many developed countries, the government comes to the rescue of the insurers, like in New Zealand; the government has a plan to cover earthquake and other “uninsurable risks”. Likewise, France and the Netherlands have a government program for flooding. Japan has a government program for earthquakes.

40

What is required is a concert` effort on the part of insurance companies, governments and the insuring public to pool in their efforts by predicting natural catastrophes through advanced technological means, identifying brewing terrorist attacks through robust security and intelligence systems, enlisting citizen services as journalist and friends of police, sharing and dissemination of information, legislative and regulatory change and above all, through rational expectations, insurance awareness and the nimble footedness required to adapt to change. That’s when insurers will be able to manage change well enough to tackle mega catastrophes even as the benchmarks spiral

41

BIBLIOGRAPHY

BOOKS:

CATASTROPHE INSURANCE - INSURANCE CHRONICLE

WEBSITES:

www.investopedia.com

www.eqecat.com

www.mbaa.org

www.unige.com

42

ANNEXURE

QUESTIONNAIRE

1. Do your company provide catastrophe insurance?

2. If no, in your company, do you provide coverage for flood, earthquake, and terrorism in any other insurance(like fire insurance) ?

3. If yes, do you provide compensation to the insurance holder only if fire occurs?

4. Do you charge extra premium to avail those services?

5. What all events do you provide in the fire insurance policy(natural or man-made events)?

43

6. Is your insurance company is planning to provide catastrophe insurance in future?

44

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close