Yogesh Lohiya as chairman cum managing director of GIC Re.

The central government has appointed Yogesh Lohiya as chairman cum managing director of GIC Re. Lohiya is promoted from the post of general manager of the New Delhi based Oriental Insurance. An engineer by profession he has authored various books on Insurance.He joined Oriental Insurance in 1977 as a class-I officer. Presently Lohiya is member of Study Group on Insurance of PHD Chamber of Commerce and Industry. Lohiya shall resume the charge of CMD on 28th May 2007.

New India, Reliance General lead insurance sector in FY07

Chennai: The government owned New India Assurance Company Limited became the first domestic non-life insurer to cross the Rs5,000 crore gross premium income mark. Though it closed FY07 with a premium income of Rs5,024.15 crore against Rs4,791.51 crore in the previous year, yet it logged the lowest growth rate amongst government insurers with just at 4.86 per cent growth.
Out of the four government companies only United India and Oriental Insurance Company Limited (premium income Rs3,940.53 crore) logged double-digit growth last year. National Insurance Company Limited ended the year with a gross premium income of Rs3810.88 crore, representing 8.15-per cent growth.
On the other hand private sector Reliance General Insurance Company Ltd registered a stupendous growth rate of 461.96 per cent — the highest amongst the 12 non-life insurers — and earned a premium income of Rs912.23 crore. In the process it catapulted itself to the seventh rank last fiscal from twelfth in the previous year with a premium of Rs162.33 crore.
The other high growth company last year was the Chennai-based Cholamandalam MS General Insurance Company Limited that earned Rs314.59 crore and registered a growth rate of 41.57 per cent.
Bcking the growth trend was another private sector insurer, Chubb General Insurance Company Limited, which logged a negative growth of 7.59 per cent, earning Rs190.16 crore, down from Rs205.77 crore in FY06.
Apart from these, the rankings amongst the 12 non-life insurers last fiscal remained unchanged. The much expected event — ICICI Lombard General Insurance Company Limited dislodging United India Insurance Company Limited from the fourth spot did not happen. United India closed the year with a gross premium of Rs3,509.95 crore leaving behind ICICI Lombard with Rs3,003.45 crore.
For quite some time during the year that went by, the difference in the premium income between the two was around Rs300 crore, fuelling expectations of private sector ICICI Lombard overtaking government owned United India.
What is interesting is that ICICI Lombard has widened the topline difference between itself and the Pune-based Bajaj Allianz General Insurance Company Limited by Rs1,198.85 crore as against Rs307.43 crore at the end of FY06. Last fiscal Bajaj Allianz closed its books with a premium of Rs1,804.60 crore.
On its part Bajaj Allianz General was the only insurer to have an underwriting profit (premium income minus claims paid) for three consecutive years and also the first private insurer to cross the Rs100-crore in profit before tax, generating Rs117 crore. Its after-tax profit stood at Rs76 crore up from Rs52 crore in 2005-06.
It also continued with its policy of transparency by declaring its detailed financials on the net.
According to Bajaj Allianz General, CEO Kamesh Goyal, "The year 2006-07 was significant for the industry as we witnessed a transition from a regulated to a de-tariffed regime. Our focus has and will continue to be maintaining the right balance between growth and profitability."
At the macro level the domestic non-life industry crossed a landmark figure of Rs25,000- crore premium during the year under review. The industry registered a premium of Rs25,002.45 crore as against Rs20,431.82 crore the previous year. The share of government companies in this is Rs16,285.51 crore as against the private player's share of Rs8,716.94 crore.
Meanwhile the two specialised insurers – Export Credit Guarantee Corporation of India (ECGC) and Star Health & Allied Insurance- have also turned out good performance. The former earned Rs618.05 crore and the later Rs22.42 crore.

IRDA sets conditions for ULIP policy holders

Mumbai: The Insurance Regulatory Development Authority (IRDA) has said that while policyholders in the unit linked insurance plans (ULIPs) can remain invested in the policy for a short period after maturity they cannot withdraw any amount or engage in fund management activities.
Hence, the policy holder will not have the option of switching funds, either to equity or debt or withdraw the amount. The decision to continue with the scheme after maturity will purely be the option of the policyholder.
While the permission has been granted for a short period of a week to a fortnight after the maturity of the scheme, no independent fund management activity will be allowed since the product does not give any insurance cover.
Officials stated that the option would enable policyholders, who are not satisfied with the net asset value (NAV) during maturity, to hold on for a better NAV.
Earlier, policyholders could remain with the scheme for five years after maturity and were entitled to partial withdrawal of funds, which have been plugged by the new clarification.

GoM not to list PSU non-life insurance companies

Mumbai: The government which is considering making draft amendments to insurance acts is not in favour of allowing the four public sector non-life insurance firms to list on the bourses mainly as the four public sector general insurance companies have over Rs1,000 crore of reserves each, officials said.
The draft amendments, prepared by the finance ministry, had proposed to amend the General Insurance Business Nationalisation Act to allow the four general insurers to raise equity capital from the market.
The finance ministry was considering to allow listing of the general insurance companies so that they have access to capital to meet solvency margins and also fund business expansion, including overseas.
The officials said that for FY07, National Insurance, which was earlier making losses, has shown improvement and the insurers have adequate reserves for expanding overseas operations.
Further there was also a move to bring down the minimum capital requirement for health insurance companies to Rs50 crore from Rs100 crore. The paid up capital of the public sector insurers in 2005-06 is Rs5 crore. Of the four PSUs, National Insurance reported a net loss of Rs106.25 crore in 2005-06, while Oriental reported lower net profits at Rs283.92 crore, New India and United have reported higher profits at Rs716.38 crore and Rs425.23 crore respectively.
As per IRDA norms, insurers have to maintain a required solvency margin (excess of the value of assets over the liabilities) of 1.5 times.

Aid for insurance PSUs to cover HIV+

New Delhi :THE government is working on an insurance scheme for HIV patients by which the government seeks to subsidise public sector insurers to cover HIVpositive patients. The proposal was mooted by finance minister P Chidambaram at the group of ministers meeting on insurance. The move comes at a time when the country is on the brink of becoming the world capital for AIDS with more than five million people diagnosed HIV-positive.

The premium charged by the insurance companies will be much higher than premiums for other health insurance schemes. Analysts said the premiums could be determined by total annual cost of HIV treatment, which is $365 in India, a 10th of what it costs in the US.

According to highly-placed sources in the government, Mr Chidambaram has asked other members to actively consider the issue. The ministry is likely to hold a meeting with various insurance PSU heads next month to arrive at a decision.

A top official at Oriental Insurance Co said, “The government has consulted us on the issue. We feel that HIV cases are uninsurable with no credible statistics available. The disease has already reached pandemic proportions, and the potential of it getting bigger is real. However, the government must consider a subvention of sorts. At least 80% of the claims should be compensated. Globally, insurance companies have tried to address HIV.”

Global consulting & actuarial firm Milliman assistant managing director Alam Singh said, “An insurance scheme for HIV-positive patients will not be a traditional insurance product but more of a disease management programme. The cap on the prices of HIV drugs has already ensured affordability, but the challenge is delivery and financing. In addition, comorbidities require aggressive management. Access and adherence to medication therapy is often the key factor in improving the lifespan of an HIV patient. This is a workable proposition if the initiative is well-designed.”

Earlier this year, the United Nations said India has the highest number of HIV infections in the world at 5.7 million. Experts say the government has understated figures on HIV patients and, on the ground, it could be much more. Though the number of patients is significantly less than 1% of the billion-plus population, in absolute terms, the number of HIV patients is huge. Besides, there is a difference between being diagnosed HIV-positive and having full-blown AIDS.

Meanwhile, labour minister Oscar Fernandes moved the proposal for HIV insurance, which is now learnt to have been taken under serious task by other ministries as well. The GoM has had three rounds of meetings so far. Other members include Planning Commission deputy chairman Montek Singh Ahluwalia, minister of state for labour Oscar Fernandes, minister of social justice & empowerment Meira Kumar and minister of state for urban housing & employment Kumari Shailja.

Source: Economic Times, May 24, 2007 (Rajat Guha & Priti Patnaik)

Foreign reinsurers may get India access

MUMBAI : The government may allow foreign reinsurance companies to set up branch offices in the country with certain regulatory restrictions, according to a senior finance ministry official. “This is one of the areas, where there is a broader political consensus with respect to foreign investment in the insurance sector,” said joint secretary (banking & insurance) GC Chaturvedi after a seminar here on Wednesday. At present, foreign reinsurers are already allowed to set up representative offices in the country. However, these outfits cannot underwrite business, which branches would be in a position to do. The proposal to allow foreign reinsurers is one of the 113 amendments proposed in the IRDA Act and the group of ministers (GoM) looking into this has already met thrice. The GoM is expected to meet again soon, he said. Mr Chaturvedi also clarified that there is no move to allow public sector insurance companies to tap the capital market to meet the fund requirement for their overseas expansion plans. “The general insurance companies have reserves of over Rs 1, 000 crore, which was adequate to meet their overseas expansions plan,” he said. As for Life Insurance Corporation (LIC), the government has given the corporation Rs 160 crore exclusively for its foreign business. However, there could be some revisions to the norms for standalone health insurance companies. There could be differential capital bases and the overall equity cap could be brought down from Rs 100 crore to Rs 50 crore. Earlier, speaking on the trends in the sector, PC James, member of IRDA, said that as the economy is moving from an industrial economy to service economy, the need for risk cover on various services is increasing, which, in turn, makes a strong case for more liability products. Already in FY07, liability products have recorded the fastest growth, he said.

Source: TIMES NEWS NETWORK, MAY 24, 2007

PSU insurance cos may not go public

MUMBAI: The government does not have any plan to allow public sector insurance companies to raise money through the stock market for meeting capital requirements and expansion plans, a senior official said on Wednesday. "We are not considering allowing public sector insurance companies to go public for capital raising. It is not required as they have sufficient reserves," G C Chaturvedi, Joint Secretary (Banking & Insurance) in Ministry of Finance, said. There was no requirement of additional capital, he said. State-run Life Insurance Corporation, the country's biggest insurer, earlier had plans to tap the stock markets for raising funds. On entry of foreign re-insurance companies in India, Chaturvedi said the government was considering allowing these companies to set up branch offices in India with certain regulatory restrictions. "The representative offices of re-insurance companies cannot write business here. The branch offices could be allowed with some regulatory restrictions," he said. The regulatory requirements would be finalised by the Insurance Regulatory and Development Authority, he said. Asked on the amendments to the Insurance Act, Chaturvedi said the Group of Ministers have had three meetings and would meet again shortly to iron out differences. The proposed amendments pertain to increasing the foreign direct investment cap in insurance sector and reduction in the minimum capital base for health insurance companies.

Source: PTI , MAY 23, 2007

Insurance brokers turn launderers

NEW DELHI: As the government enforces new measures to check money laundering, launderers are targeting insurance companies where large premium payments are split over several transactions to avoid suspicion. Brokerage commissions in cash amount to nearly Rs 900 crore in the non-life sector alone. In the non-life business, insurance brokerage is the most popular mode to launder money. Typically, most traders who want to convert black money into white channelise their operations through a brokerage. The broker promises huge discounts to the client on behalf of the insurer and is also paid a hefty commission. In non-life insurance, which is estimated to be worth Rs 22,000 crore, at least 60% of the business comes from the corporate sector. Of the Rs 12,000-crore business in the segment, Rs 6,000 crore is accounted for by the private sector. With brokerage fees touching 30%, it is estimated that half of this is routed through cash, which amounts to Rs 900 crore. The figure is higher for life insurance companies, which handle business worth Rs 35,000 crore. “Using false invoices and bills issued by a dummy of the brokerage company, the money is routed back to the broker,” an industry source said. In the life insurance business, agents are pivotal in laundering money, receiving commissions in cheques and paying clients in cash, he added. “If an agent or a broker can ensure a cash-revenue stream, insurance is the only sector where a money launderer is paid to launder money,” said a risk management consultant, who pleaded anonymity. Industry insiders say insurance companies are unwilling to crack down on money launderers as it will affect business. “There is no incentive for companies to implement anti-money laundering (AML) measures. They will only go so far as the law prescribes and will not do it of their own volition,” he added. Most insurance companies have internal checks and balances that detect the errant cases and deal with them at their level, obviating the need for supervision by Irda. Insurers, on their part, swear by internal regulations and compliance with stringent AML guidelines. Sources at the enforcement directorate feel this could be more of a I-T evasion measure as against a crime listed under the Anti-Money Laundering Act.

Source: PRITI PATNAIK, TNN, THURSDAY, MAY 10, 2007