Even as insurance companies are choking under a deluge of claims after the Mumbai floods, HDFC Chubb General Insurance Company has been left unscathed.
This is because till April this year the company was not writing any property risks in Mumbai, New Delhi, Kolkata and Chennai.
Mumbai and New Delhi are in the MMI 7 zone -- a highly earthquake prone zone. Most global insurance companies and reinsurers feel this is too severe for comfort, especially in a tariff driven market where it is not possible to charge the right price, says Shrirang V Samant, CEO, HDFC Chubb General Insurance Company.
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Similarly, Kolkata is prone to floods, while Chennai is exposed to windstorms. HDFC Chubb was hardly affected by tsunami, with just five motor claims in the region.
"Our gross loss on the property side on account of the Mumbai floods will be at worst Rs 4-5 crore (Rs 40-50 million)," said Samant.
While many private general insurers have reported claim payouts worth Rs 100-150 crore (Rs 1-1.5 billion), HDFC Chubb is looking at a figure of less than Rs 10 crore (Rs 100 million). This includes Rs 2.5-3 crore (Rs 25-30 million) on account of motor insurance claims.
The foreign partner -- Chubb, which is conservative in its underwriting strategy -- had issued a directive to the Indian joint venture company not to write any property risks in Mumbai.
Then, the reason cited was the city's high-risk exposure to earthquakes. Now, the financial capital is also prone to floods too.
Since April 2005, HDFC Chubb decided to carefully build its exposure in Mumbai. "We had to expand our market especially considering that 60 per cent of fire insurance business comes from the western region, primarily from Mumbai," said Samant.
Global reinsurers are willing to support underwriting of these risks as they know Chubb is very cautious and will follow the COPE acceptable factors, he added.
HDFC Chubb has decided to write the property business in Mumbai -- but only after seeking a slew of details, such as information on the construction of the building, occupation of the manufacturing entity being covered, whether there is adequate protection in place in terms of fire extinguishers and the actual geographical exposure of the risk.
Change in Chubb's strategy follows the need for the Indian joint venture to grow in line with the Indian market, and respond to its needs.
Apart from the possibility of natural disasters, the poor real estate construction is also an aversion to underwriting risks in these cities, said Samant.
Even as HDFC Chubb has started underwriting some property risks, it will continue to focus on casualty and liability business considering Chubb's leadership position globally.
Its focus is also on motor insurance business as this portfolio accounts for 75 per cent of the total premium. Nevertheless, its claim ratio on motor is far lower than the rest of the industry at 63 per cent.
