Bajaj Allianz General
Insurance
Incredible India – Property
Insurance
James Amberson, Global Risks
Division
14 October 2014
3
Bajaj Allianz General Insurance
� Joint venture between Bajaj Finserv Limitedand Allianz SE.
� Headquartered in Pune with a countrywidenetwork of over 200 branches spreadacross the length and breadth of thecountry
� Offers technical excellence in all areas ofGeneral Insurance as well as RiskManagement across all segments of theindustry
Claims Network0
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10
15
20
25
30
35
40
45
50
2009-10 2010-11 2011-12 2012-13 2013-14
Premium & Profit (INR billion)
Premium
Profit
4
� Virtual Allianz Global Corporate & Specialtyoffice in India
� Launch in 2013 in Pune Head Office as acollaboration between Bajaj Allianz and AGCS
� Focus on development of InternationalCorporate Business in India with reinsurancesupport 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
Global Risks Division
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Non-life Insurance Market
� India-top priority emerging market postLiberalization 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� 27 Non-life Insurers- 6 Public, 21
Private� GIC -National Reinsurer� FDI Limit current 26%, proposed
increase to 49%� 8099 Insurance Offices across the
country
57%
43%
Public - Private Sector Split*
Public
Private
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Market Background
� Scope of Distribution Channel enlarged
� Agency & Direct are Common modes of distribution
� Insurance Broking community is just over a decade old
� Detarification boosted broker market share in Corporate Sector
� There are 300 Licensed brokers in the market now
� Brokers’ direct market share of total non-life premium has grown from 16% in 2009-10 to 23.3% in 2012-13
� The IRDA (Insurance Brokers) Regulations, 2013 came into effect from 10th December, 2013
Non-life Insurance Market
Regulatory Requirement/Initiatives
� ‘Cash before cover’� Solvency margin 1.5x� Insurance repositories and
electronic issuance of policies in April, 2011
� ‘Place of Business’ gazette on 2013, new regulation for insurers to open offices
� Grievance redressal and consumer awareness initiatives
� Monitoring Investments by insurers
� Financial reporting & Data Standard regulation
� Anti Money Laundering (AML)/Know Your Customer(KYC) regulations
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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
� Coverage of underlying risk increased due to price reduction
� Natural Catastrophe exposed� Valuation impacted by fluctuating
FOREX
10.26%
4.44%
42.91%
3.59%1.63%
2.24%
22.05%
0.69%
12.19%
Split of Business*
Property
Marine
Motor
Engineering
Liability
Personal Accident
Health
Aviation
Miscellaneous
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Property Segment
� Market size Euro 985 million� Growth rate 15-22%� 4,160,000 NOPs in 2013-14� NIC ratio 52.46% for Private
71.55% for Public� 24% of the business through
Broker� Broker remuneration 12.5%
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 (combined single limit)
EURO 42 Million (sum insured basis)
0
2000
4000
6000
8000
10000
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Premium Growth in 5 year (in Million Euro)
Property Overall Market
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� 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
Property Segment
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Thresholds
SFSP Policy
Industrial all risk (IAR) -all risks s.t Exclusions-unique benefitof reinstatement value even on total loss, and with broad propertydefinitions.-TIV (PD+BI)>Euro 6mio at one location-Coverage:Section I - PDSection II - BI (MLOP Optional)-Deductible5% of the claim amount
s.t. m of EUR 300 – 30000
-Reinsurance driven Wordings & pricing. -Complete freedom for terms-TIV (PD+BI)>Euro 300 mio - Coverage 1) PD2) MBD3) BI-Deductible5% of the claim amount
s.t. m of EUR 60000
Standard Fire and Special
Perils Policy-
Standalone policy
-TIV (PD+BI)< Euro 6mio-Coverage
-PD and BI separate
-Deductible
5% of the claim amount
s.t. m of EUR 120 – 300
IAR Policy Mega Risk Policy
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UW 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
UW Specific RegulationREINSURANCE
� 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 )
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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 onthe 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
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Claims 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.
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General RegulationsConsumer/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
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NatCat ExposureNATCAT 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
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NatCat Exposure
Overview
No of events: 431
No of people killed: 143,039
No of people affected: 1,521,726,127
Average affected per year: 49,087,940
Economic Damage (Eur X 1,000): 36,972,177
Economic Damage per year (Eur X 1,000): 1,192,651
Natural Disasters from 1980 - 2010*1998 Gujarat Cyclone
500 million USD economic loss (250 million insured loss),
*1999 Orissa Super Cyclone
2.5 billion USD economic loss (100 million insured loss),
*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
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NatCat 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
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Vulnerability Atlas-Flood
Floods · Floods in the Indo-Gangetic-Brahmaputra plain are an annual featureMajor 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
NatCat Exposure
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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
NatCat Exposure
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Special 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
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FEMA 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.
Fluctuating FOREX (INR versus EUR)
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Valuation of assets should factor the volatility in the rupee exchange rate.
DIC 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
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Any claim for the loss in India is taxable in the country