The bombings in Iraq, the Maoists fighting in Nepal, the strife in the Middle East, Al Qaida -- - all of these, it seems, have had no impact on the cost of terrorism insurance.
On the contrary, terrorism cover has become cheaper by 15 per cent in the global renewal season this January. The fall in the cost of terrorism cover is despite the rise in demand.
According to a survey released by Marsh Inc, which analysed 754 firms that renewed their property covers, there has been a 43 per cent growth in the quantum of coverage.
Premiums have eased in India too, between 12 and 30 paise. It has also raised the limit of terrorism coverage to Rs 500 crore (Rs 5 billion) from the earlier Rs 300 crore (Rs 3 billion), effective February 2005.
Earlier, terrorism cover was priced at 50 paise for every Rs 1,000 sum assured (that is value of the property) in the case of industrial risks and 30 paise for every Rs 1,000 sum assured in the case of non-industrial risks.
Pricing of terrorism risk cover has fallen by 15 per cent this year on account of new capacity in the market place, said Russell M Merrett, treaty underwriter & principal, Hiscox Syndicate, UK. It is not just terrorism cover.
Reinsurance premiums across the board have fallen by 5 to 25 per cent in Asia during the renewal season in January 2005.
Property risk prices have dropped by 5 to 15 per cent and casualty business by 5 per cent, said John Thorpe, regional director, Aon Re Asia.
He among other brokers and underwriters, was speaking at a seminar on "Reinsurance-India 2005 & Beyond", organised by Aon Global.
Reinsurance prices were subdued worldwide with rates well below the peak rates experienced in the past decade, said Paul Constantinidi, executive director, Aon ReGlobal, UK. Hull marine rates are today quoting 31 per cent lower than their peak of 1994.
Similarly, liability cover is today quoting at 35 per cent less than the peak rate of 1995. This is despite insurance losses worldwide having increased to $ 40 billion in 2004 from $ 15 billion in 2003.
A large portion of these losses were on account of damage caused by natural calamities like typhoons, cyclones, and hurricanes, which accounted for $ 35 billion in insurance losses.
The reinsurance renewals were late on account of the Tsunami, which affected lakhs of lives but resulted in just less than $ 500 million in insurance claims. With new players offering capacity, the entire renewal process was completed quickly.
Munich Re and Swiss Re are the dominant players in the Asian market. The catastrophe that hit tsunami-torn areas did not have much impact on reinsurance prices as the affected areas were hardly penetrated in terms of insurance.
Gujarat very vulnerable to losses: Meanwhile, a reinsurance expert says Gujarat is one of the most vulnerable states to prospective insurance losses from disasters due to concentration of industries, especially chemical units, according to a reinsurance expert.
The risk assessment surveys have indicated gujarat has probable maximum insurances loss (pml) pegged at $1.09 billion in 150 years and is $58 million for Maharashtra, Russle Merrett, underwriter with Hiscox Syndicate, a London-based underwriting company, said.
