The Insurance Regulatory Development Authority of India and non-life insurance companies are working towards setting up a pool for creating a capacity within India to underwrite risks from natural catastrophes.
A similar pool was established after the 9/11 attacks on the US for covering terrorism risks and the pool today has a capacity to underwrite risks of around Rs 1,000 crore (Rs 10 billion).
The General Insurance Council, a self-regulatory body of non-life insurance firms, is holding discussions with the Irda on the ways and means of instituting a natural catastrophe insurance pool on the lines of the terrorism pool.
Irda wants pooling of 'catastrophic risks' as an option to ensure adequate insurance cover. Considering the geoclimatic conditions, India is prone for various types of natural disasters such as earthquakes, landslides and tsunami.
KN Bhandari, secretary general of the council, said, "We believe it is necessary as large areas in the country are prone to cyclones and earthquakes. So, we must create an Indian capacity to manage losses and not be over dependant on overseas reinsurance market."
There's another pool, third-party motor insurance pool, but it was proposed after pricing controls were lifted from January 1, 2006 because commercial vehicle owners were against increase in premium.
The Irda and general insurance companies have signed an memorandum of understanding and the motor pool would be made operational from April 1, 2007.
On natural catastrophes, the general insurance industry faces issues of data availability. The council is seeking the help of General Insurance Association of Japan for exchange of knowledge in mitigation of risks from natural catastrophes.
"Japan is a highly catastrophe prone country. We will study pre and post disaster experiences like financial assistance,and management of the pool," Bhandari said.
