Why should catastrophe insurance be part of your financial plan?

India Infoline News Service | Mumbai |

Non-life insurers had presented a concept paper on catastrophe insurance to NDMA early this year

The proposal for 'catastrophe insurance' is gaining importance due to the recent natural disaster in Uttarakhand.

Catastrophe insurance is the cover provided for specified disastrous events, such as hurricanes, hailstorms, earthquakes, fires and floods that can potentially cause severe losses to large numbers of people or businesses.

According to general and life insurers, the total claims in Uttarakhand disaster could exceed Rs. 35 billion. Most claims could come in the life and motor insurance segment followed by property insurance and claims from power generation companies.

Non-life insurers had presented a concept paper on catastrophe insurance to the National Disaster Management Authority (NDMA) early this year, according to a media report.

The concept paper stresses the need for a pool mechanism to deal with losses from catastrophic events. In the absence of such a pool, both insurers and reinsurers have to bear the cost which affects their profitability, the report added.

However, the paper is still stuck as a concept because there has been no agreement between the insurers and NDMA on who would fund the process and how the pool will function.

While both the General Insurance Council and Insurance Regulatory and Development Authority (IRDA) have made efforts to set up this pool, a formal notification giving a guidance for its implementation has not yet been given, the report further highlighted.
 

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