October 2015Issue 100

NEWS AT JBB 5

ON “WRITE” SIDE 6

Lloyd’s City Risk Index 2015-2025 6

NATIONAL 7-9

Incurred claim ratio will lead to premium reduction: Irdai 7

IRDAI to look into financial position for giving listing approval 7

General insurers' motor problem 7

GIC Re loses $1.1 million to online fraudsters 8

Baroda Dairy to cover 2.17L farmers under PMSBY 8

Demand for solar project insurance picks up 8

Do not misuse discharge voucher, Irdai to insurers 9

Tailor-made health insurance 9

Insurance in Kerala for rubber in NE 9

INTERNATIONAL 10-11

Latin America set for reinsurance growth – Fitch 10

Rate falls and strong dollar clobber brokers 10

Middle Eastern capital seeks London deployment 10

International firms poised for Brazil's reinsurance carnival 11

J.B. BODA GROUP SERVICES 12

CONTENTS PAGE NOS.

4

5

NEWS AT JBB

1. With the Asia Insurance Industry Awards being the premier regional event of the year to recognise

excellence in the insurance sector, 47 out of 428 entries made it to the list of prestigious finalists.

As part of its extensive deliberations, the Judges met several of the finalists for a face-to-face

interview in Singapore on 27 August in the final round of judging to determine the winners of each

category.

We take pride in sharing the news, that J. B. Boda Reinsurance Brokers Pvt. Ltd. made it to the list

of top three finalists for the 19th Asia Insurance Industry Awards 2015 in the category of Reinsurance

Broker of the Year.

The winners will be announced at a Gala Dinner to be held in conjunction with the Singapore

International Reinsurance Conference on 3 November 2015.

2. India’s Polar Satellite launch Vehicle successfully launched “Astrosat”, the country’s Multi Wavelength

Space Observatory along with six foreign customer satellites in to a 644.6 X 651.5 km orbit inclined at

an angle of 6 degrees to the equator. This was the thirty first consecutive success for PSLV.

J. B. Boda had the honour and the privilege of being invited by ISRO to witness the launch of PSLV

C30 on 28th September, 2015 at 10:00 am.

The launch of six co passenger satellites by PSLV-C30 was facilitated by Antrix Corporation Limited,

the commercial arm of the Indian Space Research Organisation (ISRO). PSLV launched seven

satellites in to their respective orbits, Astrosat - India, Lapan-A2 - Indonesia, NLS-14 – Canada and

Lemur 1, Lemur 2, Lemur 3 and Lemur 4 for USA.

Lloyd’s City Risk Index 2015-2025

Lloyd’s City Risk Index 2015-2025 analyses, for the first time, the potential impact on the economic

output (GDP@Risk) of 301 of the world’s major cities from 18 manmade and natural threats.

Total GDP@ Risk in all 301 cities is whopping USD 4.56 trillion. Among these , emerging cities

from South East Asia, Middle East, Latin America and Indian sub-continent, with about USD 3.25

trillion Total GDP@Risk are more susceptible.

Top 5 threats are Market crash, Human pandemic, wind storm, earthquake and Flood. Market Crash

can alone account for almost 25 % of all cities’ potential loss.

Among the 18 manmade and natural threats, 10 threats account for 91% Total GDP@Risk. Nearly

half of the Total GDP@Risk is linked to manmade threats, including Market crash, Cyber-attack,

Power outage, and Nuclear accident.

Cities with high asset values such as Taipei, Tokyo, Seoul, New York, Hong Kong, Shanghai and

London, have significant levels of economic exposure to catastrophic events.

In an increasingly interconnected and technologically dependent world, four Emerging threats –

Cyber- attack, Human pandemic, Plant epidemic and Solar storm – account for more than one fifth of

the Total GDP@Risk.

It is noteworthy that cyber-attack and market crash increasingly significant as companies expand into

new territories.

Insurance claims payout are a key source of capital injection after a disaster, and insurance plays a

major role in the recovery reduction of the impacts of the catastrophes. Investment in risk

management measures, including increasing insurance take-up, could mitigate the economic losses

associated with both man-made and natural threats.

Source: Lloyds

6

ON “WRITE” SIDE

Incurred claim ratio will lead to premium reduction: Irdai

The Insurance Regulatory and Development Authority of India (Irdai) has said if a general insurer

projects an incurred claim while filing a product and if the actual claim is lower than that by 10 per

cent over three years, they might be directed to reduce premiums.

The regulator said the insurer should ensure that its expenses are within the allowable limit on the

segmental basis. Any violation would lead to restriction on performance incentive to managing

director/chief executive director/whole-time directors and key management persons. Further, excess

will be charged to the shareholders’ fund and there would also be restriction on opening of new places

of business.

Further, there could be graded penal action and Irdai would prohibit the insurer from transacting

business in a particular segment and could also lead to removal of managerial personnel.

Source: Business Standard

IRDAI to look into financial position for giving listing approval to non-life, health, reinsurers

In its draft guidelines on issue of capital by non-life insurers, reinsurers and standalone health

insurers, Irdai said it may direct an Indian insurance company transacting the non-life insurance

business or standalone health insurance business or reinsurance business to go for public issue if the

circumstance so warranted.

The period for which the applicant company has been in the non-life insurance business or in

standalone health insurance business or in reinsurance business, will also be taken into consideration.

Its record of policyholder protection will also be looked into.

Source: Business Standard

General insurers' motor problem

General insurance companies are taking a big hit in their motor insurance portfolio, due to their being

asked to pay for third-party (TP) accidents by past policyholders, which they have to later recover.

Source: Business Standard

7

NATIONAL

GIC Re loses $1.1 million to online fraudsters

In an alarming development showing that the global cyber fraud networks are targeting Indian

financial institutions, GIC Re, the national re-insurer, has become a victim of 'phishing' attack and

lost $1.1 million. GIC Re's Dubai office fell prey to the fraud sometime in July this year, an official of

the re-insurer confirmed. A masked (fake) email purportedly from the GIC Re CMD AK Roy who

retired July-end was sent by the fraudsters to the company's Dubai office, directing it to make a

payment of $1.1 million to an American entity for reinsurance transaction. The concerned official at

Dubai branch made the payment. He later claimed he had tried to contact Roy to find out the veracity

of mail, but couldn't reach as Roy was travelling. The fraud is now being investigated by the CBI and

the Financial Intelligence Unit of the Government of India.

Source: The Economic Times

Baroda Dairy to cover 2.17L farmers under PMSBY

Baroda District Co-operative Milk Producers Union Limited popularly known as Baroda Dairy has

decided to provide insurance cover to all its 2.17 lakh milk producers (farmers) under the Pradhan

Mantri Suraksha Bima Yojana (PMSBY). The premium for the insurance scheme for all the member

farmers under PMSBY scheme will be borne by the dairy.

Source: The Tribune

Demand for solar project insurance picks up

General insurance companies are now seeing a demand for insurance policies for solar power

projects. With an increase in the number of projects, insurers said that there is a requirement for

specialised policies.

Insurers are working on how to structure and price these covers for this segment. This could also

include provisions for insufficient sunlight.

Companies have sought niche covers for solar power plants as and solar parks as well. Existing

insurance covers do not have any particular provisions for solar energy projects and hence small-sized

covers in the first stage shall be built up, said a senior official from a private general insurance

company.

There is not only an increase in solar projects, but a rise in international investment as well.

Source: Business Standard

8

Do not misuse discharge voucher, Irdai to insurers

Insurance regulator Irdai has warned general insurers against misusing discharge voucher or

settlement intimation voucher in relation to claims. The insurance companies have been for sometime

using discharge voucher so that the claim is closed and does not remain outstanding in their books.

However, Irdai said of late it has received complaints from aggrieved policyholders that the said

instrument of discharge voucher is being used by the insurers in the judicial fora with the plea that the

full and final discharge given by the policyholders extinguishes their rights to contest the claim

before the courts. “While Irdai notes that the insurers need to keep their books of accounts in order, it

is also necessary to note that insurers shall not use the instrument of discharge voucher as a means of

estoppel against the aggrieved policyholder when such policyholder approaches judicial fora,” Irdai

said in a communique to CEOs of all general insurance firms.

Source: Financial Chronicle

Tailor-made health insurance

Traditionally, factors like your age, overall health history, lifestyle and the sum insured that you opted

for decided your health insurance premiums. Health insurance companies are now taking into account

the city in which you reside while deciding the premium. The reason: Medical costs vary across

cities. Smaller cities are less expensive compared with metros. There is certainly a business case for

someone residing in a small city to pay lesser premium that one who resides in a metro. With zone-

based pricing, a health insurance seeker can get the same plan at a discounted premium compared to

an individual living in a zone where medical costs are higher. Insurance companies have categorised

various cities and towns under their own zoning structure, depending on the average cost of

healthcare and claim patterns in different cities. Premium discount across cities ranges from 10-40

percent. This way, companies ensure they are not overcharging residents of smaller cities and towns.

Source: The Hindu Business Line

Insurance in Kerala for rubber in NE

In a first-if-its kind initiative, the government has sought billions as a soft loan from the Asian

Development Bank for planting natural rubber in an additional 1 lakh hectares identified in seven

northeast (NE) states. Anticipating that the move could anger rubber growers in Kerala, where more

than 90 percent of the domestic production comes from, the government has decided to give them an

insurance cover to offset losses when prices fall below a certain level. According to official sources,

the ADB assistance, to be availed of by the Centre, would be extended to the NE states — 70 percent

as loan and the balance as grant.

Source: The Financial Express

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10

INTERNATONAL

Latin America set for reinsurance growth – Fitch

Future infrastructure, regulatory change and vulnerability to natural catastrophes set to drive growth

over coming years

Reinsurance market opportunities in Latin America remain ample, with future infrastructure projects

set to be a key driver of growth in coming years, Fitch Ratings has said.

However, a complicated environment has been holding back reinsurance growth, the ratings agency

has said.

Rate falls and strong dollar clobber brokers

Half-year figures from the six leading broking groups show the sector is under increasing pressure

from the twin threat of poor rates for many lines and the strength of the US dollar against nearly all

other currencies.

Net profit for the groups dipped 4.7% during the six months compared with the corresponding period

of 2014 and the sector’s overall margin of profit to revenue was 0.7 of a percentage point weaker at

11.3%.

Currency conversions affect both income and outgoings, of course, but the dollar’s strength seems to

be having most impact on commission and fee income. The international operations of all the major

brokers showed some heavy reductions in revenue when original currencies are converted to dollars.

Middle Eastern capital seeks London deployment

Middle Eastern insurance markets remain fragmented, with an increasing level of capital from the

region looking for opportunities to deploy in the London market, according to Guy Carpenter’s

regional head.

This leads to a lot of co-insurance in the region and there is an increasing amount of capital coming

into Western markets, particularly London, from Middle Eastern companies looking to provide third-

party capital.

Iran presents potential opportunities for the international re/insurance sector, given recent diplomatic

agreements which have signalled a potential end to Western sanctions on the Middle Eastern country.

11

Iran still has low insurance penetration and a high amount of large risks. It is not yet clear how

quickly sanctions will ease but Iran will present significant opportunities for the market.

The broker’s targeted growth lines in the Middle East continue to be property and energy. Liability

continues to be profitable but volumes are relatively low.

The role of the broker has changed significantly in recent years and the broker now acts more as an

adviser to clients, more to protect the capital of a company than the profit and loss account.

International firms poised for Brazil's reinsurance carnival

Brazil's reinsurance market is set for liberalisation in 2017, a move that pleases foreign companies

but has raised concerns at home

The rules, which will commence in 2017, promote a gradual liberalisation of the market, removing a

number of barriers to the placement of risks abroad and to the transfer of premiums between

companies belonging to the same group.

But there are fears the new regime may cause disruption to the plans of local and international

groups that have invested in Brazil in recent years in a bid to tap into a growing market and benefit

from local quota requirements.

Today, Brazil has 16 local reinsurers, 11 of which belong to international groups.

Under the current legislation, cedents need to offer 40% of their risks to local reinsurers, which have

a right of first refusal. In 2017, however, this proportion will fall to 30%. It will be further reduced

by 5 percentage points each year until local placement requirements drop to 15% in 2020.

Meanwhile limits for intra-group transfer of premiums will move in the other direction, with the

current restriction of 20% of total premiums being gradually raised to 75% by 2020.

12

J. B. BODA GROUP

J. B. BODA - First on Protection – 70 Years of Transformation.

Service with Commitment – Third Generation & Moving on …

24 Offices in India & 5 Offices Overseas in U.K., Singapore, Dubai, Nepal, Kenya.

Employs 1,000 + personnel.

S E R V I C E S

Insurance & Risk Management Consultants, Life Valuation, Life & Employee Benefit Schemes.

Actuarial Valuations.

Training Academy.

Valuation of Land, Building, Plant & Machinery.

Protection & Indemnity Insurance Services.

Fire, Engineering, Miscellaneous Accident Surveyors & Loss Assessors.

Marine Cargo Surveyors, Loss Assessors, Superintendents.

Container Surveyors, Tank Calibrators, Samplers & Analysts.

International Reinsurance Brokers (Non-Life & Life).

Direct Insurance Brokers (Non-Life & Life).

Head Office :

Maker Bhavan No. 1, Sir Vithaldas Thackersey Marg, Mumbai 400 020 (INDIA)

Telephone : + 91 22 6631 4949 / 6631 4917 * Telefax : + 91 22 22623747 / 22625112

E-Mail : jbbmbi@jbbodamail.com * Web : http://www.jbboda.net

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