INDIA – Political uncertainty in Andhra Pradesh may hike reinsurance premium

The political uncertainty and continuing agitations in Andhra Pradesh following the decision to form the state of Telangana has raised the risk of a rise in reinsurance premium for industrial establishments in Andhra Pradesh. 

Insurance companies are closely watching the situation and may raise the reinsurance premiums to be determined by the actual insurance losses incurred. While the agitations have been going on since the UPA government announced the formation of Telangana almost two months back, insurers say that while there have been significant economic losses, the insurance losses are not huge as of now. 

They are, however, watching the situation closely as the state has several mega projects in oil and gas, steel, power among others. Projects of Rs 1,000 crore and above are considered big risks. 

“Andhra Pradesh agitation is being looked keenly by insurance companies and at the time of renewal (between January and March) if they assess that there have been big insurance losses, then reinsurers will explore to revise the reinsurance premiums appropriately,” said KK Mishra, CEO Tata AIG General Insurance. 

Generally, all insurers close their reinsurance window for the next year before the closing of the financial year, which happens between January and March. During this period, they assess losses incurred and decide on the reinsurance premium for the next year. 

“Till now not much has happened in terms of losses and therefore no decision has been taken on premiums. If there are instances of attack on a factory or losses because of the agitation then we will see a rise in premiums,” said KG Krishnamoorthy Rao, MD and CEO, Future Generali India Insurance company