Early this year, non-life insurance companies had presented a concept paper on catastrophe insurance to the National Disaster Management Authority (NDMA).
The concept paper highlights 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, leading to a big hit on their profitability.
However, it is still stuck as a concept because there has been no consensus between the insurers and NDMA on who would fund the process and how the pool will function.
Officials from the general insurance sector said that while they had presented their case to the finance minister, a formal decision is yet to be taken.
A senior official of a public general insurer said that the model of insurance in this category, means of settling claims, reimbursements to NDMA and other authorities are areas are being debated upon. “The main areas that are being discussed include who would fund the process and formation of the pool, which are the categories of population that would be covered and whether to have this cover applicable across India or only in those regions prone to such natural calamities.”
He added while earlier, it was proposed to have separate covers for people below and above the poverty line, this was scrapped later.
According to industry experts, the General Insurance Council and NDMA would have to discuss each of these issues in detail and decide on the nature and pricing of this cover. They added it would take at least 8-12 months for it to be implemented.
In India, while there are covers to protect property and life from incidents such as fire, floods and earthquake, there is an absence of a ‘natural catastrophe cover’
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