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General Insurance Corporation of India (GIC), the re-insurance company for general insurance companies in India is expected to report a net loss of Rs. 1,500 crores this year.
The GIC business consists of the domestic business from general insurance companies in India and the company’s business is Afro-Asian region as part of its global portfolio. A large part of this loss is from the overseas business due to natural calamities like Japan Earthquake and the floods in Thailand. The losses in the domestic business lines like motor and health portfolios, which are loss-making, also contributed to this overall number.
Role of re-insurers – All insurance companies re-insure their business with re-insurers in India and abroad. This is true for both life and general insurance companies. Basically insurance companies also insure their business. This serves to de-risk the insurance companies and hence the end-customers to a large extent. Just as you pay a premium for an insurance policy, insurance companies also make a payment to the re-insurer for their businesses.
Now as a result of this loss, GIC would revise its rates for businesses and this could result in higher premiums being charged from end customers. Motor and health insurance may see an increase in premiums on account of this. Though loss making businesses would see the maximum increase, all business lines might see an increase to offset a major increase in any one business line. Of course, GIC could refuse to re-insurer loss making businesses also.