The Hindu : Business : Terror insurance pool corpus set to increase

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Terror insurance pool corpus set to increase

Special Correspondent

Products are bound to be upgraded, says IRDA chief

Framework for M&A by the end of current fiscal
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— PHOTO: S. SUBRAMANIUM

GROWING CLAIMS: J. Hari Narayan (centre), Chairman, IRDA, along with Shikha Sharma (right) Chairperson, FICCI’s Insurance and Pension Committee, and Amit Mitra, Secretary General, FICCI, at the 12th conference on insurance in New Delhi on Wednesday.

NEW DELHI: The Rs. 750-crore corpus of the ‘Terror Insurance Pool’ set up by the insurance industry is set to increase in the wake of the recent terror attacks in Mumbai, according to Insurance Regulatory and Development Authority (IRDA) Chairman J. Hari Narayan.

Addressing a conference on insurance organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here on Wednesday, Mr. Narayan said that the insurance pool, created at the behest of the IRDA for the non-life sector, would grow as insurance companies were bound to be buffeted by growing claims.

While loss of life due to terrorist strikes is already covered by most life insurance policies, Mr. Narayan said: “Terror insurance products are bound to be upgraded and the rate of premium might change depending upon the evolution of new products that the industry may come up with.”

Mr. Narayan indicated that the IRDA was considering a host of issues such as rationalisation of the insurance intermediary sector, permitting outsourcing of non-core activities, new modes of distribution such as e-sales, e-marketing and payment of premium through re-charge coupons.

Also, to encourage consolidation in the private sector, the regulator would come out with a framework for mergers and acquisitions (M&A) by the end of the current fiscal. “Given what is happening in the market, it is an opportune time for mergers and acquisitions,” he said. Appropriate guidelines for M&A in the sector were being worked out and “the exposure draft [draft guidelines] would be ready by March 2009,” he said.

At present, with 21 life insurance companies and 20 non-life insurance companies operating in the country, there are no specific guidelines for M&A activity in the sector. Expressing concern over the widening asset-liability mismatch, Mr. Narayan said: “We are getting into asset-liability mismatch of varying degrees. There is lack of long-term securities in the market, which might impact certain kind of liabilities.” The IRDA would be taking up issues concerning asset-liability mismatch with the Finance Ministry, he said, while noting that it was also looking at introducing mark-to-market norms for the investment portfolio of companies.

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