India Full Axco Report 2011

Country Map
Map of the Area

Market Developments
Key Facts
General Country Information
Politics and the Economy
Supervision and Control
Taxation
Legal System
Insurance Market Overview
Reinsurance
Distribution Channels
Multinationals, Captives, ART and Risk Management
Insurance Policies
Natural Hazards
Property
Construction and Machinery Breakdown
Motor
Workers' Compensation and Employers' Liability
Liability
Surety, Bonds and Credit
Marine, Aviation and Transit
Personal Accident and Travel
Appendix No 1 - Market Statistics
Appendix No 2 - Company Statistics
Appendix No 3 - Directory
INSURANCE MARKET REPORT
INDIA: NON-LIFE (P&C)
AXCO 2011
NON-LIFE (P&C)
Contents Page
Country Map
Map of the Area
Market Developments
Key Facts
Country Indicators
History
Geographic Description
10
Population and Demographic Trends
15
Largest Cities
19
21
Government Structure
21
Current Political Situation
22
Economy
25
Currency and Exchange Control
33
35
Legislation
35
Compulsory Insurances
37
Changes in Legislation
38
Supervision
40
Non-Admitted Insurance Regulatory Position
43
Fronting
47
Company Registration and Operating Requirements
47
Taxation
52
Legal System
54
57
Historical Development
57
The Market Today
57
Market Participants
61
Reinsurance
72
Local Reinsurance Market
72
Local Reinsurance Arrangements
76
86
97
Multinationals
97
Captives
98
A.R.T. & Risk Management
98
Insurance Policies
India - Non-Life (P&C) Report
100
Axco 2011
Contents Page
Natural Hazards
103
Earthquake and Other Geological Hazards
103
Windstorm
108
Flood
110
Bushfire
113
Subsidence
114
Hail
115
CRESTA
115
Property
116
Construction and Prevention
117
Social Hazards
120
Householder/Homeowner
123
Industrial and Commercial
125
Agriculture
130
134
Construction and Erection all Risks
134
Machinery Breakdown
139
Motor
142
152
Liability
157
General Third Party
157
Product Liability
160
Professional Indemnity
162
Directors' and Officers' Liability
165
Pollution and Environmental Liability
166
Financial and Professional Risks
169
170
172
Marine Hull
173
Marine Cargo
176
Marine Liability
180
Energy
181
Aviation
182
187
Personal Accident
187
Travel
190
192
Insurance Supervisor's Report
192
Non-Life Market Totals
192
Non-Life Insurance
193
Personal Accident
195
Axco 2011
Contents Page
197
199
Industry Organisations
199
Insurance Companies
200
Reinsurance Companies
205
Captive Managers
206
Intermediaries
206
Loss Adjusters
209
Axco 2011
Country Map
India-Non-Life(P&C)
LastUpdated:Aug2011CountryVisited:Oct2010
1
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Map of the Area
India-Non-Life(P&C)
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Market Developments
=================================================================================
Update August 2011
AttheendofJuly2011,theIndianpressreportedthataparliamentarystandingcommitteehadraisedthree
issueswiththeMinistryofFinanceinregardtoproposalstoraisetheceilingonforeigninvestmentof
insurancecompaniesinthecountryfrom26%to49%.Marketobserversbelievethatthecommittee's
interventionmaymeanthattheimplementationoftheInsurance Laws (Amendment) Bill 2008willbe
delayedevenfurther.
On15April2011,anotificationreleasedbytheInsuranceRegulatoryandDevelopmentAuthority(IRDA)
introducedspecificrateincreasesformotorthirdpartyonlyinsurancewhichwereintimatedintheExposure
Draftdated4January2011.Witheffectfrom25April2011newpremiumratesweremadeapplicableand
aresetoutinAnnexure 1ofthenotification.Theseincreasesinpremiumrateswillhelpinsurerscoverthe
enormouslossesincurredduringthefinancialyearending31March2011whichwereduetoheavyunder
provisiononmandatorythirdpartyclaims.
On5April2011,theIRDA Guidelines on Distance Marketing of Insurance Productswereintroducedand
willbecomeeffectivefrom1October2011.ThesenewguidelineswillcomplementtheIRDA Advertising
Guidelinesof14May2007.TheIRDA Guidelines on Distance Marketing of Insurance Productsapplyto
distancemarketingcarriedoutbyinsurersandintermediariesatthevariousstagesoftheoffer,negotiation
andconclusionofsaleprocesses.
InNovember2010,anillegallybuiltresidentialblockcollapsedkillingatleast66people.WhilstDelhi'schief
ministerSheilaDikshit,calledthescaleofthetragedy"unprecedented"criticssaidthatitwasapredictable
consequenceoftheadministration'sfailuretoprovidesufficienthousingortoenforcetheplanningrules.
Thenewnationalgoodsandservicestax(GST)setforimplementationduringApril2011hasnowbeen
delayed.RecentpressreportsclaimfinanceministryofficialsbelievethattheGSTregimewillnotcomeinto
effectuntil2012.
On1February2011theIRDAissuedaguidelineoninsurers'increasinguseofoutsourcing.Amongstother
thingstheguidelinesstatethataninsurer'soutsourcingarrangements"neitherdiminishitsabilitytofulfilits
obligationstopolicyholdersnorimpedeeffectivesupervisionbyIRDA."Theauthorityhasaskedinsurersto
restrictoutsourcingtocoreactivitiessuchasclaims,underwritingandpolicyservicingtoguardagainst
majorfinanciallapsesandtoprotectpolicyholders.
Itisevidentthattheregulator,theInsuranceRegulatoryandDevelopmentAuthority(IRDA),ispaying
specialattentiontointermediarycompliance.Inadditiontoitsrigorousreviewofbrokerlicencerenewalin
mid-2010,itwasreportedinAugustthattheregulatorwastakingactionagainstalargenumberof
corporateagentsforfailuretofilepermanentaccountnumbers(PAN)detailswithitsoffice.
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Market Developments
TheNationalAviationCompanyofIndia(NACIL),whichincludestheAirIndiaaccount,hasplacedits
insurancecoverwiththeleadingprivateinsurer,ICICILombardforthe2010-11policyyear.Accordingto
reportsintheinsurancepress,NACILispayingUSD29.95mninannualpremiumforthenewpolicywhich
coversallairlineswithintheNACILgroupforhull,liability,warandwarliabilityrisks.
=================================================================================
The May 2009 general election returned the Congress Party to office with an increased majority. This
meant that it no longer has to rely on left-wing coalition partners and therefore has more room to
manoeuvre in its attempts to liberalise the economy and behave in a friendlier manner towards the
businesscommunity.
Foreign direct investment in the Indian economy averaged 2.2% of GDP annually between 2005 and
2009,andthecountryreceivesthelargestshareofremittancesintheworldinabsoluteterms.In2009,
India had the world's eleventh-largest economy. It has recorded robust expansions over the last five
years,withrealGDPgrowthaveraging8.3%annuallybetween2005and2009.Growthisexpectedto
equal7.3%ofGDPin2010and7.8%ofGDPin2011.
In2008-09non-lifeinsurancepremiumsamountedtoINR260.1bn(USD5.37bn),lifepremiumsreached
INR2,218bn(USD45.82bn)andpremiumsforPA&healthcarewereINR75.1bnn(USD1.55bn)giving
agrandtotalofINR2,553.1bn(USD52.74bn).Thenon-lifeincomewasup5.60%onthepreviousyear
and the life income was up 10.15%. PA & healthcare premium income increased by 28.65%. Total
premiumincomeincreased10.72%.
Most, if not all, non-life insurers are recording underwriting losses. In 2009-10 companies' estimated
overallresults,however,wereprofitablethankstoahealthyinvestmentincome.Thelossesregistered
by the Indian Motor Third Party Pool which covers commercial vehicles and is shared amongst all
non-lifeinsurersarehavingaparticularlynegativeinfluenceonresults.
Theindustryiscallingforanincreaseinmotorthirdpartypremiumratesandhasformedacommitteeto
look into the feasibility of premium increases. The regulator, the Insurance Regulatory & Development
Authority(IRDA)hasyettomakeadecisiononthequestionofderegulatingthemotorthirdpartytariffin
spiteofdemandsfrominsurers.
The"detariffication"ofthenon-lifemarkethasresultedinapricewarwithnon-technicalpricinginmost
cases, especially as the scramble for market share continues. In property classes, for example, rates
havefallenasmuchas80%.Marketparticipantscommentruefullythat"premiumsarewhatbrokerage
usedtobe".
The Insurance Laws Amendment Bill 2008 which proposes a number of major changes including an
increaseinpermissibleforeigninvestmentinlocalinsurancecompaniesfrom26%to49%isstillbefore
parliament awaiting time for its passage into law. When this report was in preparation, there was no
clear indication as to when this would be. The bill also includes a proposal that foreign reinsurers be
permittedtoopenbranchofficesinIndia.
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Market Developments
AconsortiumledbyRelianceGeneralInsuranceistheleadcompanyontheAirIndiaExpressBoeing
737800crashon22May2010.AirIndiaExpressisthebudgetarmofAirIndia.Onlyeightofthe166
people on board the flight survived the crash which occurred as the aircraft landed at Mangalore, in
India'ssouth-west.Theflight,whichoriginatedinDubai,isunderstoodtohaveovershottherunwayand
toppledintoadeepravineadjacenttotheairport.
During2010brokerlicenceshavebeenprocessedforrenewalaftertheexpiryoftheirthree-yearterm.
Amongst a number of decisions, the IRDA has declined the renewal of Willis India Insurance Brokers'
licence. An appeal against the ruling has been submitted. In addition, Aon Global Insurance Brokers'
licenceisunderscrutiny.
The Future
In2010andbeyond,non-lifeinsurerswillbeworkingtoputtheunderwritinglossesofrecentyearsbehind
them.Themarketmustreturntoriskunderwriting,notleastinproperty,andrefrainfromstrivingtoretain
businessatanyprice.
Inthefirsthalfof2010,insurancesourceswereoftheopinionthatprobablythebottomoftheratingcycle
hadbeenreachedandthatincreaseswouldbegintoemerge.Indeedtherewasalreadysomeevidenceat
that time to suggest that a hardening of rates had started, particularly in policies in which coinsurance
partnerscouldagreepremiumincreases.
Pressuretoreturntomorerealisticratinglevelshascomefromthe"market'spreferrednationalreinsurer",
GICRe,whichtightenedupits2010-11renewaltermsforitsdomesticcedingcompaniesduetothevery
poortechnicalresults.Thecompanieshavebeenrestrictedastothevolumeofcoinsurancebusinessthat
theycancedetotheirautomatictreatiesandalsotheamountoffacultativebusinesstheycanwrite.This
couldresultinmorefacultativebusinessbeingcededtoforeignmarkets.TheGICResaysthatthisisworth
theprice.
As from 1 April 2010 further remedial measures involving enhanced deductibles for property and
engineeringclasseshavebeenintroducedonavoluntarybasisbytheinsurersthemselves.
Somependinglegislationsuchastheproposaltoincreaseforeigninvestmentinlocalinsurancecompanies
and another to permit foreign reinsurers to set up branches will bring about significant changes to the
market.
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Key Facts
=================================================================================
Update August 2011
delayedevenfurther.
=================================================================================
Thegraphbelowshowsthegrowthinthelife,non-lifeandPAandhealthmarketsfortheperiod2005to
2009.
New statistical information may have been included in the appendices.
WhenthisreportwasinpreparationtherateofexchangewasINR44.15:USD1andthisratehasbeen
usedforallcurrentconversions.Forpreviousyearstheaverageannualratefortheyearinquestionhas
been used (see Currency and Exchange Control within the Politics and the Economy section of this
report).
Indiahasalandareaof1,183,364squaremiles(3,064,898squarekilometres).Figuresfromthe2001
census showed that the country's population had passed the one billion mark, making it the world's
second-mostpopulouscountryafterChina.In2010,thepopulationwasestimatedtobe1.21billion.
A number of empires have ruled India over the centuries, the last being that of the British who
establishedthemselvesthereinthe17thand18thcenturies.Independencewasachievedin1947,when
theformerBritishterritorieswerepartitionedbetweenIndiaandPakistan.
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Key Facts
India'slandfrontieris9,500miles(15,289km)andthecoastlineis3,814miles(6,138km).Itsnorthern
borderstouchuponBhutan,Afghanistan,Nepal,TibetandSinkiang.Theeasternborderisboundedby
BangladeshandMyanmar(Burma).InthewesttheborderiswithPakistan.TheislandofSriLankais
situated off the south-east coast. India is geographically diverse with the fertile Gangetic plains in the
northandcentre,desertinthewestanddensetropicalforestsinthenorth-east.
The May 2009 general election returned the Congress Party to office with an increased majority. This
meant that it no longer has to rely on left-wing coalition partners and therefore has more room to
manoeuvre in its attempts to liberalise the economy and behave in a friendlier manner towards the
businesscommunity.
Foreign direct investment in the Indian economy averaged 2.2% of GDP annually between 2005 and
2009,andthecountryreceivesthelargestshareofremittancesintheworldinabsoluteterms.In2009,
India had the world's eleventh-largest economy. It has recorded robust expansions over the last five
years,withrealGDPgrowthaveraging8.3%annuallybetween2005and2009.Growthisexpectedto
equal7.3%ofGDPin2010and7.8%ofGDPin2011.
In 2008-09, non-life insurance premiums amounted to INR 260.1bn (USD 5.37bn), life premiums
reachedINR2,218bn(USD45.82bn)andpremiumsforPA&healthcarewereINR75.1bn(USD1.55bn)
givingagrandtotalofINR2,553.1bn(USD52.74bn).Thenon-lifeincomewasup5.60%ontheprevious
yearandthelifeincomewasup10.15%.PA&healthcarepremiumincomeincreasedby28.65%.Total
premiumincomeincreased10.72%.
There were 24 non-life insurers operating in July 2010, including six public sector insurers and three
"stand-alone" personal healthcare insurers. The IRDA registered L&T General Insurance Co Ltd, a
generalinsurancecompanypromotedbyLarsen&ToubroIndiatooperatewitheffectfrom12July2010
bringingthetotalofnon-lifecarriersupto24.
Non-admittedinsuranceisnotpermitted.Onlyaninsurerthatisregisteredtodobusinessinthecountry
maycoverinsurableriskssituatedinIndiawithsomeexceptions.Forexample,althoughimportersand
exportersofgoodsmaynotpurchasemarinecargoinsurancefromnon-admittedinsurers,international
marinecargomaybeinsuredelsewhere,inaccordancewiththetermsoftradesuchasimportsonaCIF
basis.
Inacirculardated4December2006,theIRDAannouncedthatithaddecidedthattheratesapplicable
to fire, engineering, motor (except third party only cover), workers' compensation and other classes of
businesscurrentlyundertariffswouldbewithdrawnfrom1January2007.Theonlyremainingtariffsare
thoseforcompulsorymotorthirdpartyandtheterrorismpool.
The Insurance Laws Amendment Bill 2008 which proposes a number of major changes including an
increaseinpermissibleforeigninvestmentinlocalinsurancecompaniesfrom26%to49%isstillbefore
parliament awaiting time for its passage into law. When this report was in preparation, there was no
clear indication as to when this would be. The bill also includes a proposal that foreign reinsurers be
permittedtoopenbranchofficesinIndia.
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Key Facts
The IRDA's "status of insurance brokers" list of 30 June 2010 contains the names of 302 brokers of
which24hadlosttheirlicencesintherenewalprocessand64weredescribedashavingthe"renewal
application under scrutiny" or "regulatory action is under process". Of the remaining 214 brokers with
licences,sixarespecialistreinsurancebrokersand208retailbrokers.Somebrokersarejointventures
with foreign companies whose shareholdings are limited to 26%. Amongst these are Willis India
InsuranceBrokerswhoselicencerenewalhasbeendeclined.Thecompanyhasappealed.Inaddition,
AonGlobalInsuranceBrokers'licenceisunderscrutiny.
Throughouthistory,Indiahassufferedgravelyfromtheeffectsofearthquakes.Cycloneshitthesouthern
statesandcoastlineborderingtheBayofBengaleachyear,causingvariousdegreesofdamageoftenof
disastrousproportions.Floodingoftencomesinthewakeofcycloneswithsimilarresults.
Compulsorythirdpartycoverisrequiredfortheownersofalltypesofvehicles,whicharedrivenonthe
public highway. The Public Liability Insurance Act 1991 was passed as a direct result of the Bhopal
disaster.Itsprovisionsobligethemanufacturersofhazardousmaterialstoinsureagainsttheriskofthird
partyliabilityarisingoutoftheiractivities.Legislationobligesdirectandreinsurancebrokerstotakeout
professionalindemnityinsurance.Aviationcarriers'liabilityisobligatoryasisprofessionalindemnityfor
mutualfundmanagers.TheregulationsoftheSecuritiesandExchangeBoardofIndia(SEBI)obligeall
stockbrokerstoarrangesimilarinsurance.
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Country Indicators
Demographicandeconomicdataforthefiveyearsto2011areshownbelow,withprojectionsforthefinal
twoyears.
Indicator
2007
2008
2009
2010
2011
Totalpopulation
(mn)
1,164.7
1,181.4
1,166.0
1,184.0
1,202.0
TotalGDP(USD
mn)
1,142,325.1
1,223,250.2
1,287,298.9
1,559,758.2
1,817,011.2
RealGDPgrowth
(%)
9.0
6.7
7.6
7.3
7.8
Inflation(%)
6.4
8.4
10.9
10.3
5.7
Unemployment(%)
9.8
10.4
10.7
10.8
10.6
Source: IMF and EIU
History
Early History
2500BC
Thefirstmajorcivilisation,theHarappan,developedintheIndusvalley.
1500BC
Hinduism was introduced by Sanskrit-speaking Aryan tribes who invaded from the
north-west.
320BC
TheMauryanEmpirewasfounded.Itcontrolledmostofeastern,westernandcentralIndia.
TheempireconvertedtoBuddhismaftertheBattleofKalingain260BC.
8thcAD
ArabinvadersestablishedaMuslimfootholdinthenorth-westandIslamwasintroducedto
India.
1498
VascodaGamalandedatCalicutontheMalabarCoastandopenedthewaytoIndiafor
thePortugueseand,subsequently,forotherEuropeanpowers.
1526
BaburestablishedtheMughulEmpire.CentredonDelhiitcoveredmuchofnorthernIndia
andreachedthezenithofitspowerunderAkbartheGreat,whowasemperorfrom1556to
1605.
1608
TheBritishEastIndiaCompanyestablisheditsfirstsettlementatSurat.
1757
Robert Clive's victory at Plassey initiated the steady spread of British control throughout
thesubcontinent.
1857
The mutiny of sepoy regiments led to the abolition of the governing powers of the East
IndiaCompanyandtheirassumptionbytheBritishCrownthefollowingyear.
1885
The Indian National Congress was founded and 20 years later, in 1905, adopted
self-governmentasapoliticalobjective.
20th/21st Century
1920
MahatmaGandhifoundedtheNon-Co-operationMovementtocampaignforindependence
fromBritishrulewithaprogrammeofnon-violentcivildisobedience.
1947
India became independent from Britain. The subcontinent was divided into mainly Hindu
IndiaandthelargelyMuslimPakistan.
1948
MahatmaGandhiwasassassinatedinDelhi.WarbrokeoutwithPakistanoverKashmir.A
secondconflictfollowedin1965.
1950
Indiabecamearepublic.
1962
AfrontierwarwithChinainAssamendedIndia'spolicyofnon-alignment.
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1971
IndianarmedinterventionsecuredtheindependenceofEastPakistan(Bangladesh).
1974
The declaration of a state of emergency by Prime Minister Indira Gandhi suspended all
civilrightsforthreeyears.
1984
Mrs Gandhi was assassinated and was succeeded as prime minister by her son Rajiv
Gandhi.
1991
Prime Minister Rajiv Gandhi was assassinated. The rupee was devalued and economic
liberalisationintroduced.
1998
India and Pakistan carried out nuclear tests leading to the imposition of economic
sanctionsbytheUSandotherWesternpowers.
2002
Both India and Pakistan successfully test-fired weapons with nuclear capabilities. War
seemed imminent as relations between the leaders of the two countries deteriorated.
Although actively working to avert war, Britain and the US advised their citizens to leave
thearea.
2004
TheIndianNationalCongressPartyledbytheItalian-bornSoniaGandhi,widowofRajiv,
securedanunexpectedvictoryintheAprilelections.AtalBihariVajpayee,primeminister
andleaderoftheHinduBharatiyaJanataParty(BJP),resigned.MrsGandhideclinedthe
premiershipinfavourofhercolleagueManmohanSingh,aformerfinanceminister.
In November India began to withdraw troops from Kashmir. In December a tsunami
devastatedsoutherncoastalareas,killingthousands.
2005
InJulyIndiasignedanuclearco-operationdealwiththeUS,heraldingapossibleliftingof
sanctions on Indian access to civilian nuclear technology. Floods and landslides in the
samemonthkilledanestimated900peopleinMumbaiandtheMaharashtraregion,andin
Octoberover1,000peoplewerekilledinanearthquakeinIndian-administeredKashmir.
2006
In March a nuclear agreement was signed with the US giving India access to civilian
nucleartechnologyinexchangeforgreaterscrutinyofitsnuclearprogramme.
2007
InJulyPratibhaPatilbecamethefirstwomantobeelectedpresident.
2008
TerroristgunmenattackedlocationsinMumbai(Bombay)includingtheChhatrapatiShivaji
(Victoria)railwayterminusandtheTajMahalandOberoihotels.Throughoutthecity179
peoplediedandpropertydamage,particularlyatthehotels,wasextensive.
2009
India's Congress Party was overwhelmingly re-elected in general elections conducted

betweenAprilandMay.ManmohanSinghreturnedtothepostofprimeminister.
Geographic Description
Country Name
TheRepublicofIndia.
InHinduthenameofthecountryisBharat.
India'snameisderivedfromtheIndusriver,whichisinthenorth-westofthesubcontinent,wherethefirst
majorcivilisationdevelopedbetween3000BCand2500BC.
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Frontiers and Coastline
IndiaissituatedinSouthAsia,andextendssouthwardsintotheIndianOcean.Itslandfrontierstretchesfor
9,500 miles (15,289 km) and its coastline for 3,814 miles (6,137 km). The land lies between the Bay of
Bengal on the east and the Arabian Sea on the west. In the north the country has borders with Bhutan,
Nepal, Tibet and the Sinkiang region of China. The eastern border is bounded by Bangladesh and
Myanmar(Burma),andinthewesttheborderiswithPakistan.TheGulfofMannarandthePalkStraitoff
thesouth-eastcoastseparateIndiafromSriLanka.
Land Area
Thecountryhasalandareaof1,183,364sqmiles(3,064,898squarekilometres)andis2,009miles(3,233
km)northtosouthand1,833miles(2,949km)easttowest.Itiscommonlydescribedasasubcontinent,
anditslandareaincludestheAndamanandNicobarIslandsintheBayofBengal,andLakshadweepinthe
ArabianSea,togetherwithJammuandKashmir.Indiaisapproximatelyone-thirdthesizeoftheUSand13
timesthatoftheUK.
Administration
For the purposes of administration, India is divided into 29 states. According to the 2001 census, the
largeststatesintermsofpopulationsizewereasfollows:
State
Population (mn)
UttarPradesh
166
Maharashtra
97
Bihar
83
WestBengal
80
AndhraPradesh
75
Asofearly2000therewereonly25states.InNovember2000,however,Chhattisgarhwascarvedoutof
Madhya Pradesh, Uttarakhand from Uttar Pradesh and Jharkhand from Bihar. In December 2009 the
governmentannouncedtheformationofanewstate,Telangara,fromtheterritoryofAndhraPradesh.
Inadditiontothestates,therearesevenunionterritoriesthatareadministereddirectlybythepresidentin
Delhithroughanappointedadministrator.Theterritoriesarelistedbelow.
AndamanandNicobarIslands-situated620miles(1,000km)offtheeastcoastofIndiaintheBayof
Bengal,theyconsistofabout500tropicalislands,mostofwhichareuninhabited.
Chandigarh-thecityissituatedontheedgeoftheHimalayasandisthecapitalofthestatesofPunjab
andHaryana.ItisIndia'snewestcityandwasdesignedbytheSwiss-bornarchitectLeCorbusierinthe
1950s.
DadraandNagarHaveli-situatedonthewestcoastofIndia,thisterritoryissurroundedbythestateof
Gujarat.ItwascontrolledbythePortugueseuntil1954andbecameaunionterritoryin1961.
DamanandDiu-DamanisontheGujaratcoast,whileDiuisanisletontheKathiawarPeninsula,just
offthecoastofGujarat.ThePortuguesegovernedbothcitiesuntil1961.
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Delhi-thecapitalofIndiaandthethird-largestcityinthecountry.ItisalsoaNationalCapitalTerritory.
The city is situated on a tributary of the Ganges and is bordered on the east by the state of Uttar
Pradesh,andonthesouth,westandnorthbythestateofHaryana.
Lakshadweep-comprisedofagroupofabout25islandsoffthewestcoastofKeralaintheArabianSea.
Puduchcheri(formerlyPondicherry)-aFrenchterritoryuntil1956,Puduchcheriissituatedontheeast
coast,threehours'drivesouthofChennai(Madras).AswellasPuduchcheriitself,theunionterritoryas
awholeismadeupoftheformerFrenchenclavesofKaraikal,MaheandYanam.
InrecentyearsthegovernmentinDelhiisbelievedtohaveconsideredgrantingstatehoodtoPuduchcheri.
Therehasbeenlittleevidencetosuggestthatthelocalpeopleareveryenthusiastic,however,asthiscould
result in an increase in taxes due to the way states are funded. The provisions of the Treaty of Cession
signedwithFrancein1956requirethatareferendumisheldbeforeanychangeismadeintheterritory's
status.
Dadra and Nagar Haveli and Daman and Diu separated from Goa in 1987 when the latter achieved full
statehood.
Topography
India is bounded in the north by the Himalayas, the world's highest mountains, which together with the
PlateauofTibetseparatethecountryfromtherestofChina.WaterfromtheHimalayasfeedsintotheRiver
Ganges,whichflowseastwardsacrosstheplainofUttarPradesh.TothewestisthevalleyoftheIndus,
which,thoughnowinPakistan,gaveIndiaitsname.EastoftheGangesbasin,theRiverBrahmaputraruns
throughthejunglesofAssam.TheBrahmaputraandtheGangesjoinforcesattheirlowerreachestoform
thegreatdeltaregionthatisBengal,halfinIndia,halfinBangladesh.
SouthoftheGangesValleyisthesouthernplateauoftheDeccanflankedbythehillsoftheEasternand
WesternGhats.MostDeccanriversflowtotheeastintotheBayofBengal.
Climate
India'sclimatevariesconsiderablyduetothecountry'svastsize.Inthefarnorth,theclimateismarkedly
different from that of the extreme south. The mountain valleys of the Himalayan foothills are very cold in
winter but pleasantly warm during the summer, whereas in the southern part of the country the climate
tendstobemoretropicalandtheheatmuchgreater.
Indiahasathree-seasonyear:hot,wetandcool.ThehotbeginstobuildupinthenorthfromFebruaryand
by April or May the heat is very intense and can be unbearable, especially for visitors from temperate
climes. By the end of May the first signs of the monsoon season are visible. The principal monsoons
emerge from the south-west, striking the coast of Kerala before working their way north-west across the
countryoverthenextmonthandahalf.Inmostareasitwillrainforanhourortwoeachday,althoughin
someregionssuchasAssamandBengal,therainmayseemendless.
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BySeptemberorOctoberthemonsoonhascometoanendinmostpartsofthecountry.Itgiveswaytodry
warmweatherinthesouth,whichbyAprilandMaycanbecomeexceedinglyhotanduncomfortable.The
northernpartofthecountryturnsquitecool,especiallyatnight,untilFebruary,whenthehotseasonbegins
again.
ThecoastalplainsoftheEasternGhats,andtheAndamanandNicobarislands,aresubjecttoadifferent
monsoon,the"north-east",whichbeginsinmidOctober,endinginthenewyear.
Averagemonthlytemperaturesandrainfallareasfollows:
Delhi
Madras
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Bombay
Calcutta
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Population and Demographic Trends

Population
Acensusisheldevery10years.Accordingtothelastcensusin2001,India'spopulationhasnowpassed
theonebillionmark,makingittheworld'ssecond-mostpopulatedcountryafterChina.
IndiraGandhiintroducedaprogrammeofcompulsoryfamilyplanninginthe1970s.Theincreasinguseof
family planning methods and education has resulted in a drop in the annual rate of natural increase to
14.5%.Greateraccesstoreproductiveserviceshas,however,resultedinanincreasinggenderimbalance,
asfamiliesoptforsex-specificabortionsinrecognitionofthetraditionalpreferenceforsons.Insomestates
thishasledtoprojectedratiosof800womenforevery1,000menby2025.
Thetotalpopulationsince1950wasasfollows:
Year
Population ('000)
2009
1166000
2008
1181410
2007
1164670
2005
1130618
2000
1042590
1990
862162
1980
692637
1970
552964
1960
448314
1950
371857
Source: UN Population Division, IMF and EIU
Populationprojectionsareasfollows:
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Year
Population ('000)
2050
1613800
2040
1564763
2030
1484598
2020
1367225
2010
1214464
Source: UN Population Division
Itisestimatedthatby2050IndiawillhaveovertakenChinatobecometheworld'smostpopulouscountry.
India'spopulationisextremelyvariedintermsoflanguage,religion,casteandclass.Thepopulationis
primarilymadeupoftwomajorgroups.InthenorththoseofIndo-Aryanorigindominateandcompose
about70%ofthecountry'stotalpopulation.ThoseofDravidianorigin(originallyfromtheMediterranean
areaaround2000BC)livemainlyinthesouthofthecountryandmakeup25%ofthetotalpopulation.The
primarydistinction,however,isreligious,with80.5%ofthepopulationbeingHindus,13.4%Muslimswith
theremaining6.1%otherreligions,includingChristianity.Thepopulationismainlyruralwith60%ofIndians
stilllivinginvillageswithfewerthan4,000inhabitants.AccordingtotheUNPopulationDivision(UNPD)the
populationin2010wasestimatedto30%urbanandwasexpectedtoequal39.7%by2030.
Thebirthanddeathratesper'000since1950wereasfollows:
Year
Birth rate
Death rate
Rate of natural increase
2005to2010
23.0
8.5
14.5
2000to2005
25.4
8.9
16.5
1995to2000
27.7
9.5
18.2
1990to1995
30.7
10.4
20.3
1985to1990
32.5
11.1
21.4
1980to1985
34.4
12.0
22.4
1975to1980
36.2
13.1
23.1
1970to1975
37.3
15.2
22.1
1965to1970
38.8
17.3
21.5
1960to1965
40.5
19.9
20.6
1955to1960
42.2
22.7
19.5
1950to1955
43.4
25.5
17.9
Theinfantmortalityrateper'000livebirthssince1950wasasfollows:
Year
Infant mortality rate
2005to2010
54.6
2000to2005
61.8
1995to2000
69.8
1990to1995
78.5
1985to1990
87.8
1980to1985
97.6
1975to1980
107.7
1970to1975
119.7
1965to1970
129.9
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Year
Infant mortality rate
1960to1965
140.7
1955to1960
152.2
1950to1955
163.7
Althoughtheinfantmortalityratehasreducedsignificantlysince1950,itisstillmuchhigherthantherates
ofsomeofIndia'sneighbours.TheinfantmortalityrateinIndia,forexample,ismorethandoublethatof
China.
Thechangeinagestructureofthepopulationsince1970isshownbelow,includingprojectionsfor2015,
2025and2050.
Age group
1970
1980
1990
2000
2005
2015
2025
2050
To14
40.9
39.3
37.9
35.0
33.1
28.7
24.7
18.2
15to59
53.6
54.9
56.0
58.3
59.9
62.6
64.2
62.2
60and
above
5.5
5.8
6.1
6.7
7.0
8.7
11.1
19.6
The change in age structure of the population aged 65 and 80 and above is shown below, including
projectionsfor2015,2025and2050.
Age group
1970
1980
1990
2000
2005
2015
2025
2050
65and
above
3.3
3.6
3.8
4.3
4.6
5.4
7.3
13.7
80and
above
0.3
0.4
0.4
0.5
0.6
0.8
1.0
2.6
Life Expectancy
Average life expectancy for the five-year period from 2005 to 2010 was 62.1 years for males and 65.0
yearsforfemales.Thetablebelowshowshowthishaschangedsince1950.
Year
Males
Females
2005to2010
62.1
65.0
2000to2005
60.9
63.3
1995to2000
59.7
61.3
1990to1995
58.3
59.4
1985to1990
57.6
57.6
1980to1985
56.1
56.0
1975to1980
54.1
53.8
1970to1975
51.0
49.8
1965to1970
48.0
46.5
1960to1965
44.8
43.2
1955to1960
41.7
40.0
1950to1955
38.7
37.1
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Thefollowingtableshowsexpectationsoflifeatvariousagesfortheperiod2005to2010.
Present age
Males
Females
Atbirth
62.09
65.04
62.21
66.06
10
57.81
61.79
20
48.48
52.54
30
39.62
43.61
40
31.14
34.65
50
23.07
25.86
60
16.01
17.89
70
10.45
11.41
80
6.46
6.71
90
3.89
3.77
100+
1.78
1.69
Major Causes of Death

Dataidentifyingtheleadingcausesofdeathisnotcollectedonaregularbasisbecauseofthedifficultiesin
developingtheappropriatereportingsystems.Thestatisticsavailablearebasedonasampleregistration
system: sample data is collected in various states and this is extrapolated to arrive at estimates for the
whole country. The latest statistics available are those for 2002 and are as detailed below. The
percentagesareofalldeaths.
Cause of death
Percentage
Cardiovasculardisease
27.1
Respiratoryinfections
10.8
Unintentionalinjuries
7.7
Perinatalconditions
7.3
Malignantneoplasms
7.2
Respiratorydiseases
5.9
Diarrhoealdiseases
4.4
Tuberculosis
3.5
HIV/Aids
3.5
Digestivediseases
3.3
Childhoodclusterdiseases
2.8
Intentionalinjuries
2.4
Other
14.1
Total
100.0
Source: World Health Organization (WHO)
Language
Hindiistheofficiallanguage,althoughitisspokenbylessthan50%ofthepopulation.Englishisthemajor
languageofpoliticsandcommerce.Morethan1,500languagesanddialectsarespokeninthecountryasa
whole. The constitution recognises 22 regional languages including Assamese, Bengali, Gujarati, Hindi,
Kannada,Kashmiri,Malayalam,Marathi,Oriya,Punjabi,Sanskrit,Sindhi,Tamil,TeluguandUrdu.
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Religion
Accordingtothe2001census,80.5%ofthepopulationareHindu,13.4%areMuslim,2.3%areChristian
(mostlyRomanCatholic),1.9%areSikhand1.9%heldotherbeliefs.
The number of Parsees is dwindling and it is thought that now there are only 90,000, living mostly in
Mumbai (Bombay). Although their community is small, they still wield a significant amount of influence in
business, education and politics. The Tatas, India's leading industrialists, are the best-known Parsee
family.
Largest Cities
Capital
In1911KingGeorgeVdecreedthatthecapitalshouldmovefromCalcuttatoDelhi,butthebuildingand
subsequentinaugurationofanewcitywasnotcompleteduntil1931.
Delhi is the third-largest city in India with an estimated urban population of 16.64 million in 2007 (13.85
millionin2001).Thepopulationisexpectedtoequal18.60mnby2015.TheIndianparliamentisbasedin
thecity,whichisthenorthernindustrialhubofIndia.Manyindustrieshavebeenestablishedthereincluding
textiles, chemicals, fertilisers and leather goods. In recent years Delhi's service sector has grown
enormously,withexpansionintheareasofinformationtechnology,telecommunicationsandbanking.Delhi
hasalsoattractedmanymultinationalcompanies,drawnbyitslarge,skilled,English-speakingworkforce.
Other Major Areas/Cities

India'sprincipalcitiesarelistedbelowwithestimatedpopulationfiguresfor2001.
Mumbai(formerlyBombay-16.4million)
ThiscityisIndia'sfinancialcentre.ItisthecapitalofthestateofMaharashtra,andthehomeoftheHindi
blockbuster film industry, famously known as "Bollywood". The city's name was changed in 1996 to the
Marathanameforthecitytoreflectitsheritageandemergencefromitscolonialpast.
Kolkata(formerlyCalcutta-13.2million)
ThiscitywasfoundedbytheEnglishmerchantJobCharnockin1686andremainedthecentreofBritain's
administration in India until Delhi became the capital in 1931. It retains some fine examples of colonial
architecture and is the country's second-largest port, an important commercial and industrial centre, and
capitalofthepopulousstateofWestBengal.Thenameofthecitywaschangedtowhatisdescribedasits
originalBengalinamein2000.
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Chennai(formerlyMadras-6.4million)
ChennaiisthecapitalofTamilNadu.Thenamewaschangedin2000,althoughmanystillcontinuetocallit
Madras.ItwasestablishedbyFrancisDayin1639asanEastIndiaCompanyfortandtradingpost,and
becamethepoliticalandeconomiccapitalofBritishterritoryinSouthIndia.Itisamajorportandthehome
ofTamilfilm-making.Therearemanywell-establishededucationalinstitutesinChennaiandithasastrong
traditionofpublicdebate,publishingandjournalism.
Bangalore(5.7million)
BangaloreisthecapitalofKarnatakaandisconsideredtobeoneofIndia'smostliberalandprogressive
cities.IthasalsobeendubbedIndia'sSiliconValleyandnearly60%ofIndia'ssoftwareexportscomefrom
Bangalore. In May 2008 Sterling Urban Developments, a joint venture between an Indian company and
HDFCPropertyFund,announcedplanstoinvestINR47.2bn(USD1.08bn)tobuildaresidentialcomplex
withretailandcommercialoutletsinWhitefield,asuburbofBangalore.
Ahmadabad(5.7million)
ThisistheprincipalcityofGujuratandoneofIndia'sforemostindustrialcentres,withparticularemphasis
ontextiles,resultinginhighlevelsofnoiseandpollution.OneofitstouristattractionsisGandhi'sspiritual
retreat(ashram).Thecity'sjewellersandgoldsmithsarerenownedthroughoutIndia.
Hyderabad(5.5million)
ThetwincityofHyderabad-SecunderabadisthecapitalofthestateofAndhraPradesh.IthasbothaHindu
andMuslimheritageandwasoncethecentreofthelargestMuslim-ruledprincelystateinIndia.Hyderabad
has a fast-growing high-tech industry and is sometimes referred to as Cyberabad. A third city is now
developing on the outskirts and is called Hyderabad Information Technology Engineering Consultancy
(HITECCity).
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Government Structure
Constitution
India became independent of Britain in 1947 and in 1950 a federal parliamentary republic was declared.
PartoftheindependenceprocesswasapartitionoftheformerBritishterritorieswithPakistan,theeastern
partofwhichbecametheindependentstateofBangladeshattheendof1971.
India'sconstitutionwasapprovedbytheConstituentAssemblyon26November1949andwasinaugurated
on26January1950.Therehavebeen93amendmentstotheconstitutionsinceitsinitialadoption,themost
recentinJanuary2006.
Executive/Legislature
Theheadofstateisthepresidentoftherepublicwhoiselectedeveryfiveyearsbythemembersofthe
federalandstateparliaments.Althoughintheorythepresidentexercisesfullexecutivepower,heorsheis
confinedbytheconstitutiontoactingontheadviceoftheCouncilofMinisters,whichisabodyofmembers
appointedbythepresidentontherecommendationoftheprimeminister.
The upper house (Rajya Sabha), or Legislative Assembly, is currently made up of 245 members (the
maximumnumberpermittedis250).Thetotalelectivemembershipisdistributedamongthestatesinsuch
awaythattheratiobetweenthenumberofseatsallottedtoeachstateandthepopulationofthestateis,so
faraspracticable,thesameforallstates.Ofthe250maximum,thevariousstateassemblieschoose238
members, and the president appoints the other 12 to represent minorities. The upper house has special
powerstoenactfederallawsincertaincircumstances,butitmaynotoverridefinancialbillsthathavebeen
passedbythelowerhouse(LokSabha).
Thelowerhouse(LokSabha),orPeople'sAssembly,currentlyhas545members(themaximumnumber
permittedis552).Thetotalelectivemembershipisdistributedamongthestatesinsuchawaythattheratio
betweenthenumberofseatsallottedtoeachstateandthepopulationofthestateis,sofaraspracticable,
thesameforallstates.Ofthe552maximum,550membersareelectedonabasisofuniversalsuffrageby
registeredvotersaged18andover,whilsttheremainingtwomembersareappointedbythepresidentto
representtheAnglo-Indians.Anumberofseatsarereservedforminorities,79seatsforscheduledcastes
and 40 for tribes. The Lok Sabha is the only house in which financial bills, such as the budget, may be
introduced.
Electoral System
ThelastpresidentialelectiontookplaceinJuly2007;thenextisdueinJuly2012.
MembersoftheRajyaSabhaareelectedbythestateassembliesandservesix-yearterms,withone-third
ofthemembersretiringeverytwoyears.Electionstothestateassembliestakeplaceatvaryingtimesof
theyear,dependingonthestate.
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MembersoftheLokSabhaserveforatermoffiveyears.Thelastelectionswereheldon16Apriland13
May2009;thenextisduein2014.
ElectoralmalpracticeiswidespreadinIndiaanditiscommonknowledgethatmanyconvictedorsuspected
criminalsholdseatsinstateandnationalgovernments.Thelargeelectorate,however,helpstoensurethat
thefinalresultsactuallyreflectthewishesofthepeople.
Local Government
State governors are appointed by the president for five-year terms, while the union territories are each
administeredbythepresidentthroughalieutenantgovernororanadministratorappointedbythegovernor.
The state parliaments or legislative councils are either unicameral or bicameral and have authority over
police,publicorder,agriculture,publichealth,educationandlocalgovernment.Thefederalparliamenthas
authorityoverallothermatters.Furthermore,thepresidentmaysuspendastate'sgovernmentintheevent
ofanemergency.Thestateparliamentsareelectedatleasteveryfiveyearsandone-thirdofmembersof
councilsaresubjecttoelectioneverysecondyear.
Within each state, levels of local government devolve upon municipal corporations, committees, boards
andcouncilsinurbanareas.Inthecountryadministrationiscarriedoutbyasystemofvillagecouncils,or
"panchayatiraj".
Current Political Situation

Present Government
ThemainpoliticalpartiesaretheIndianNationalCongressParty(INC-referredtoastheCongressParty)
and the Bharatiya Janata Party (Indian People's Party - BJP). There are also several smaller regional
parties.
The Congress Party secured an unexpectedly large proportion of seats in the 2009 elections, precluding
the need for the construction of a complex and unstable coalition, which has typically followed Indian
electionsinrecentdecades.Itnowformsaminoritygovernmentthatenjoystheimplicitsupportofsmaller
parties.
ManmohanSinghbecamethecountry'sfirstSikhprimeministerfollowingthe2004elections.Hecameto
powerpledgingtoreducepoverty,advanceeconomicreformsandstrengthenrelationswithPakistan.Mr
SinghwasinpoorhealthafterheartbypasssurgeryinJanuary2009,butneverthelesstookofficeagainas
primeministeron22May2009afterthedeclarationofgeneralelectionresultson16May.
Pratibha Patil became the country's first woman president following the elections in July 2007. She
advocateswomen'srightsandisasteadfastloyalistoftheGhandifamily,whichdominatesIndianpolitics.
Theresultsofthe2009electionareshowninthetablebelow.
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Party name
Acronym
Seats
IndianNationalCongress
INC
206
BharatiyaJanataParty
BJP
116
BahujanSamajParty
BSP
21
CommunistPartyofIndia(Marxist)
CPM
16
NationalCongressParty
NCP
RashtriyaJanataDal(National
People'sParty)
RJD
CommunistPartyofIndia
CPI
169
n/a
545
Othersincludingcommunists,
socialists,independents,regional
partiesandtwopresidential
nominees
Total
Source: Election Commission of India
Political Situation
Upontakingofficein2004,MrSinghpledgedtobringabouteconomicreformandreducepoverty.Hehad
somesuccessdespitetheconstraintsimposedbycoalitionpartners,whichhadsuccessfullyhaltedfurther
privatisationandhaveattemptedtolimitforeigninvestment.
ThemostrecentgeneralelectionconcludedinMay2009,resultinginanunexpectedlyhighpluralitywinfor
theCongressParty,givingittherequiredsupporttogovern.Thenewgovernmentwasinstalledon22May
2008. Many smaller parties pledged to support Congress, including the Bahujan Samaj Party (BSP), a
high-profile faction representing the disadvantaged Dalit caste. The BJP also promised its co-operation,
despitenotjoiningthegovernment.
Election results were met with enthusiasm by the international community, with prospective investors
hopeful that the strong electoral returns for the Congress Party would create a stable and predictable
environment for investment and economic liberalisation. It was long assumed that the Congress Party
favoured a more open economy, but was thwarted by its leftist coalition partners who feared that India
wouldbeexploitedbyforeigninterests.Duringitstenure,thecoalitionwasexpectedtoaddresseducation,
malnutrition,andlivingstandardsaswellaseconomicreforms.
Theneedforfar-reachingchangesineconomicpolicieswasoffsetbyimmediatepressuresin2010,with
foodinflationrisingto18%inresponsetoapoormonsoonseason.Theincreaseinpriceshasrendered
negationofpricesupportsforstaplessuchascookingoilandpetrolpoliticallyimpossibleintheshortterm,
despitetheweakerfiscalposition.Theopposition,ledbytheBJP,hascapitalisedonthepricehikesasa
sign of government incompetence, seeking favour with poorer voters, a traditional source of Congress
support. Substantive reforms are thus likely to be delayed until the next harvest, with the president
endorsingsubsidycutsasnecessaryinthelongerterminordertocontroldemandandinflation.
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Thecoalitionhasalsoprioritisedgenderequality,passing33%quotasforfemalerepresentationinnational
andstateassembliesinFebruary2010.Otherprioritiesincludeinternalsecurity,whichremainsaconcern
followinganIslamistterroristattackonMumbaiinNovember2008.
In addition to terrorist attacks from Islamist groups, Naxilist (Maoist) insurgents are causing serious
problems for Indian security forces in various regions of India with Chhattisgarh now at the heart of the
conflict.TheinsurgentstracetheirorigintoanarmedstruggletoempowertheruralpoorinWestBengalin
1967.
International Relations
Relations between India and Pakistan have always been poor, with the two countries fighting three wars
sincepartitionin1947andnarrowlyavoidingafourthin2002.Relationsimprovedduringthepremiershipof
theBJP'sAtalBihariVajpayeewhoinitiatedpeacetalkswithIslamabad,inspiteofthefactthathisparty
containednationalisticHinduelements.
SoonafterhisappointmentasprimeministerfollowingtheMay2004generalelections,ManmohanSingh
declaredthathewouldseek"friendlyrelationswith[their]neighbours,moresowithPakistanthanwithany
othercountry".AfterhissubsequentmeetingwiththethenPakistanipresident,GeneralPervezMusharraf,
ajointdeclarationwasissuedinwhichthetwoleadersannouncedthatthepeaceprocessbetweenthetwo
countrieswas"irreversible".TheneweruptionofviolenceinKashmirinJune2008showedthattensions
havenotdisappeared,however,asthecoreissueoftheterritory'sstatusremainsunresolved.
The attacks in Mumbai from 26 to 29 November 2008 by terrorist gunmen believed to be Pakistani
nationalsunderminedthetwocountries'effortstoimproverelations.On5January2009,Indiapresented
PakistanwithadossierofevidencewhichseemedtoindicatethattheradicalgroupLaskhar-e-Taibawas
responsible. India has suggested the possibility of official Pakistani involvement, and called on the
internationalcommunitytoinsistthatPakistanpreventthegroupandothermilitantsfromoperatingwithin
itsborders.Pakistanpledgedfullco-operation.RelationswerestrainedagaininNovember2009,whenthe
Indian Embassy in Kabul, Afghanistan, was bombed, with suspected involvement by Pakistan's
Inter-ServicesIntelligence.
Interactions with India's other large Muslim neighbour, Bangladesh, are largely warm, but deteriorated in
2001 when the BJP took power. India claims that there are around 90 terrorist training camps in
Bangladesh and is keen to curb illegal immigration, which it says poses a security risk. Relations have
improvedundertheCongress-ledgovernment.
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India'slinkswiththeUSimprovedduringtheBushadministration,whentheUSviewedChina'sexpanding
economic power as a threat to its strategic dominance and pursued a closer relationship with India as a
counterbalance.InMarch2006anuclearagreementwassignedwiththeUSgivingIndiaaccesstocivilian
nucleartechnologyinexchangeforgreaterscrutinyofitsnuclearprogramme.Thedealnotonlyhelpedto
strengthenrelationsbetweenthetwocountries,butalsoeasedIndia'spoliticalisolationwhilstbenefitingthe
economies of both countries. Warm relations were expected to continue under the new Obama
administration, as India was honoured with the government's first formal state dinner in November 2009.
Nevertheless, recent US policy towards Pakistan has alienated some in the Indian establishment, with
analystsobservinglessengagementbetweenthetwoallies.
AnaccordbolsteringtradeanddefencetieswasconcludedduringastatevisittoSaudiArabiainFebruary
2010.
India belongs to most major international organisations including the UN, International Bank for
ReconstructionandDevelopment(IBRD),ILO,IMF,WHO,WTOandtheCommonwealth.
Economy
Economic Performance
India is a two-tier economy with a globally competitive knowledge-driven service sector and a large
agriculturalsector.Foreigndirectinvestmentaveraged2.2%ofGDPannuallybetween2005and2009,and
thecountryreceivesthelargestshareofremittancesintheworldinabsoluteterms.In2009Indiahadthe
world's11th-largesteconomy.
The Indian economy has recorded robust expansions over the last five years, with real GDP growth
averaging8.3%annuallybetween2005and2009.Thishasallowedthegovernmenttofinanceitsprojects
forruraldevelopment,withIndiaannouncingaUSD9bnappropriationfornationalrailimprovementworks
from early 2010. An additional USD 500mn in reserves was proposed to be withdrawn for road
improvementsin2011,supportingamorepositivelogisticalnetworkformigrants,familiesandbusinesses.
Pervasive corruption, particularly in the lower levels of government, increases the cost of conducting
business.Effortstocombatcorruptionaregainingground,however,andaretypifiedbytheproliferationof
valueless "anti-corruption" notes designed to resemble those for INR 50 (USD 1). These notes are
distributedbylocalsinresponsetobribedemandsinordertoembarrasscorruptofficials.
Futuregrowthcouldbeconstrainedbybureaucraticbarriers,therigidlabourmarket,andendemicpoverty,
whichaffects29%ofthepopulationaccordingtonationalmeasures.Growthisexpectedtoequal7.3%of
GDP in 2010 and 7.8% of GDP in 2011. Controlling inflation is one of the government's chief economic
priorities as much of the population consumes only what is necessary for daily survival, leaving little
flexibilityinhouseholdbudgets.Inflationwasexpectedtoaverage10.3%in2010and5.7%in2011.
In May 2010, Standard and Poor's reported that India's sovereign debt was rated BBB- with a stable
outlook.
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Gross Domestic Product
TheactualGDPfiguresforthefiveyearsto2009areshownbelow.Theseareintwoforms,localcurrency
andconvertedtoUSdollarsattheaverageannualrateofexchange.
ThegrowthinrealGDPforthefiveyearsto2009isshownbelow.
GrowthinGDPwasexpectedtoexpandby7.3%in2010,followedbyanincreaseof7.8%in2011.
In2009themaincontributorstotheGDPwere:
Industry
% of total
Services
54.6
Industry
28.2
Agriculture
17.1
Source: EIU
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In2009GDPpercapitainUSDinIndiaandneighbouringcountrieswasasfollows:
Country
GDP per capita
Russia
8,778
Brazil
8,116
China
3,648
India
1,075
Source: Axco Global Statistics.
Current Account Balance

ThecurrentaccountbalanceinUSdollarsforthefiveyearsto2009isexpressedinthegraphbelow.
Thecurrentaccountdeficitwasprojectedtoaverage1.6%ofGDPin2010and2.0%ofGDPin2011.
Foreign Exchange Reserves

Foreignexchangereserves,excludinggold,arequotedinUSdollarsbelow.
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Inflation
Annualconsumerpriceinflationforthefiveyearsto2009isshowninthegraphbelow.
Inflationwasexpectedtoriseto10.3%in2010andthendecreaseto5.7%in2011.
Interest Rates
Keyinterestratesoverthefiveyearsto2009areshownbelow.
Investment type
2005
2006
2007
2008
2009
Depositrate
5.90
7.30
7.40
6.00
7.50
Discountrate
6.00
6.00
6.00
6.00
6.00
Lendingrate
10.75
11.19
13.02
13.31
12.19
Moneymarket
6.30
7.30
7.80
6.50
4.80
Source: IMF & EIU
Employment
Thepercentageoftheworkingpopulationunemployedoverthefiveyearsto2009isshowninthegraph
below.
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Underemployment and poor employment quality are widespread. The informal sector accounts for over
90%oftotalemployment.
Thenumberofemployeesindifferentindustriesin2004-05isshownbelow.
Industry type
Number employed ('000)
Community,socialandpersonal
service
11,072
Manufacturing
5,619
Transport,storageand
communications
2,837
Finance,insuranceandrealestate
1,931
Agriculture,huntingandfishing
1,479
Miningandquarrying
1,093
Construction
960
Electricity,gasandwater
910
Wholesaleandretailtrade,
restaurantsandhotels
559
Total
26,460
Source: Ministry of Statistics and Programme Implementation
Over 90% of all workers are employed in the informal sector. In February 2006 India's largest-ever rural
jobs scheme was launched by the government aimed at ending poverty for over 60 million families; it
guaranteed100days'manualworkayear,paidattherelevantminimumwage,foreveryruralhousehold.
Earnings
Average gross monthly earnings for the listed work categories are shown below for October 2004 (latest
availableinformation).
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Work category
Average monthly earnings

INR
USD
Mechanicalengineer
12,000to20,700
265to457
Accountant
10,500to20,500
232to452
Foreman
7,500to11,500
166to254
Skilledworker
5,500to9,000
121to199
Secretary(personal)
4,500to11,500
99to254
Clerk
4,000to7,000
88to154
Industrialworker
3,500to8,500
77to188
Unskilledworker
3,000to4,500
66to99
Source: EIU
Theseratesarepurelyindicativeaswagesvarybystate,industryandlevelofexperience.
Additionalbenefitsareoftenaddedtotheemploymentpackageofemployeesatmanagementlevel,
particularlyinmultinationalcompanies,andthesecanresultinanadditionofafurther50%to70%of
salary.ForMediclaimbenefits,forexample,theemployerpaysanadditionalamounttotheemployeeofup
toINR10,000(USD227)peryear,anddeductsincometaxonthisamount.Iftheemployeecanproduce
receiptstoshowtheamountofmedicalexpensesincurred,thenthisamountisnotliabletoincometax,
subjecttoanannualmaximumofINR10,000(USD227),andarefundoftaxcanbeclaimed.
TheMinimum Wages Act 1948providesforthegovernmenttosetminimumstatutorywagesinanumberof
industries.Theobjectiveistopreventlowpayandexploitationofworkers,andwagelevelsarereviewedat
leastonceeveryfiveyears.Thereisnouniformnationalminimumwage,however,andthelevelsof
minimumwagevarybyskilllevel,industryandstate.TheminimumwageaccordingtotheNationalFloor
LevelwasINR100(USD2)fromNovember2009.Authoritiesproposedtheadoptionofageneralminimum
wageforallinformalworkersinJanuary2010.
Key Industries
Agriculture
Around two-thirds of India's population work in agriculture, which together with forestry and fishing,
contributed 17% of GDP in 2008. A large part of agriculture is only at subsistence level, however, and
manyfarmersintheruralareaslivebelowthepovertyline.Therehavebeenincreasesinproductivitysince
independence as a result of the introduction of new fertilisers and widespread irrigation schemes, but
comparedtoothercountriesintheregion,agriculturalproductionisstilllow.Oneofthemainreasonsisthe
small acreage of landholdings and the droughts that affect the Indian subcontinent. Lower than average
rainfallduringtheprecedingmonsoonseasonincreasedfoodinflationto18%inearly2010.
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Theprimaryagriculturalproductisfoodgrains:riceandwheat.Indiaistheworld'ssecond-largestproducer
of paddy rice and the fourth-largest producer of wheat. Other important crops include oilseeds, potatoes,
sugar,cotton,tea,pulses,coffee,rubberandjute.
Manufacturing
Thesectorisoneoftheenginesofeconomicgrowth.In2008industryaccountedfor25.8%ofGDP,with
overhalfthecontributionattributabletomanufacturing.Inthe1990sthegovernmentintroducedeconomic
reformstoreduceredtapeandderegulatethissector,buttheprivatisationofheavyindustryhasbeena
slowprocessandmuchisstillunderstatecontrol,includingthebulkofsteelmanufacturing,shipbuilding,
engineering,chemicalsandpaper.
Nearlytwo-thirdsofthesteelindustryisstillcontrolledbystate-ownedcompanies.Thesectorhasbeenhit
by the imposition of import tariffs by the US and competition from Commonwealth of Independent States
(CIS) countries. Nevertheless the sector is attracting private investment and India ranks among the 10
largeststeelproducersintheworld.
India's growing automotive industry is led by Tata Motors, whose parent company is amongst the most
trustedinthecountry.Risingincomelevels,poorpublictransportsystems,wideravailabilityofcarfinance
and an increase in the young population are the main drivers of demand. Recognising the market's
potential in early 2010, GM and SAIC, a Chinese company, agreed to collectively begin manufacturing
smallcarsusingtheIndiandeliverysystemsandfactoriesalreadyownedbyGM.
India'stextileindustryaccountsforaround10.9%oftotalexportrevenue.Thecountryisaleadingglobal
supplier of jute, silk and cotton, with the sector benefiting from a plentiful supply of skilled, inexpensive
labour.
Services
The services sector has been the driving force behind the increase in GDP over recent years, and
accounted for 57.3% of GDP in 2008. The biggest expansion has been in IT and telecoms, and many
foreigncompaniesnowuseIndianlabourfortheircallservicesandIT-enabledservices.Thegovernment
hasrelaxedtheforeigndirectinvestmentrestrictionsinthee-commercesectorandforeigninvestorscan
nowhaveupto100%equityinbusiness-to-businessventures.
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In the private sector, software engineering has experienced high rates of growth with software exports
forecast to reach USD 57bn by 2011. The number of Indian IT professionals working abroad has
decreasedinrecentyears,andthishasresultedinmoreITworkbeingdoneinIndiaitself,especiallyatthe
heart of the nation's IT industry in Bangalore, and at Hyderabad Information Technology Engineering
Consultancy (HITEC City). The government established this city in the late 1990s to attract international
software developers to India; it gave generous tax breaks and subsidies to encourage this development,
andover50companiesarenowlocatedthere.
Tourismisasignificantforeignexchangeearner.Thissectorbolstersemployment,butithassufferedfrom
the perception amongst foreigners that India is a poor, politically unstable country, as well as from
recommendationsthattravellersgetvaccinationstooffsettheriskofdisease.
Exports and Imports

In2008totalexportswereUSD187.9bnbrokendownasfollows:
Commodity
Percentage
Engineeringgoods
25.0
Gems&jewellery
14.7
Petroleumproducts
14.3
Textiles&textileproducts
10.9
Source: EIU
Themostimportantexportdestinationswereasfollows:
Destination
Percentage
US
11.9
China
10.1
UAE
8.1
Singapore
4.0
Source: EIU
In2008totalimportswereUSD315bnbrokendownasfollows:
Commodity
Percentage
Petroleumproducts
33.2
Electronicgoods
9.5
Gold&silver
8.7
Machinery
8.2
Source: EIU
Themostimportantsourcesofimportswereasfollows:
Source
Percentage
China
10.4
US
6.0
Singapore
4.0
Germany
3.8
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Source: EIU
Currency and Exchange Control

Currency and Exchange Rate
TheIndianrupee(INR)isdividedinto100paise.Fromtimetotimereferenceismadetoanoldunit,the
anna,ofwhichthereare16totherupee.Adecimalsystemofcoinagewasintroducedin1957.Currencyis
oftenquotedinlakhsorcrores,whichareexplainedbelow.
1lakh
INR100,000
1crore
INR10mn
Theofficialexchangeratewasabolishedon1March1993andisnowamanagedfloatingrate.Thisrate
hasbeenfairlyconsistentoverthelast10years.
TheaverageannualexchangerateagainsttheUSdollarforthefiveyearsto2008isshownbelow.
The latest exchange rate when this report was in preparation has been used for all current conversions
(seeKeyFacts).Forpreviousyears,theaverageannualratefromtheabovechartfortheyearinquestion
hasbeenused.
Exchange Control
Alltransactionswithnon-residentsaresubjecttoforeignexchangecontrols,buttheINRisfullyconvertible
fortradeandcurrentaccountpurposes.Exceptforcertainspecifiedrestrictions,foreigncurrencymaybe
freelypurchasedfortradeandcurrentaccountpurposes,andsuchpurchasesmustbemadeatthemarket
rate.
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Thefollowingarefreelypermitted,subjecttoproceduralformalities:allremittancesabroadthatrequireprior
approvalarrangements,suchasjointventureandtechnicalcollaborationagreements,andtheremittance
of interest, dividends, service fees, royalties, repayment of overseas loans and the like. Repatriation of
capitalisalsofreelypermittedforfundsbroughtintoIndiaorforinvestmentsmadeafter1949.Forsalesof
Indian assets other than sales between two non-residents, the terms of sale require the approval of the
exchange-controlauthorities,andcertainconditionsmustbesatisfied.
The Foreign Exchange Management Act (FEMA) governs foreign exchange transactions including those
for insurance. Amongst other things, the act stipulates that if an Indian insured procures cover from a
foreign insurer without requisite approval, it amounts to a breach of FEMA, which attracts the following
sanctions:
apenaltyuptothreetimestheamountinvolvedinthecontraventionwheresuchamountisquantifiable
oruptoINR200,000(USD4,530)wheretheamountisnotquantifiable
apenaltyofuptoINR5,000(USD113)perdayforacontinuingcontravention,and
confiscationofanycurrencysecurity,oranyothermoneyorpropertyinrelationtothecontravention.
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Legislation
Insurance Legislation
ManyprovisionsoftheInsurance Act 1938andsubsequentamendmentsof1950and1968stillregulate
life and non-life insurance although over the years other laws and rules for regulation and supervision of
insurancehavebeenintroduced,startingwiththeMarine Insurance Actof1948.
The Life Insurance Corporation Act 1956 nationalised all life offices, placing their business within the
state-ownedcompany,theLifeInsuranceCorporationofIndia(LIC).
In 1972, the general insurance business of 106 private companies including 33 foreign operations was
takenoverbythestateinaccordancewiththetermsoftheGeneral Insurance Business (Nationalisation)
Act.ThelegislationsetuptheGeneralInsuranceCorporationofIndia(GICRe),aholdingcompanybased
inMumbai(Bombay),enablingittoacquirethebusinessofallprivatenon-lifeofficesandoperatethrough
fourwhollyownedsubsidiariesasfollows:
NationalInsuranceCoLtd
Kolkata(Calcutta)
NewIndiaAssuranceCoLtd
Mumbai(Bombay)
OrientalInsuranceCoLtd
Delhi
UnitedIndiaInsuranceCoLtd
Chennai(Madras)
After many years of debate following the publication of the Malhotra Committee report in 1994 in which
recommendations to deregulate the insurance market were first made, the Insurance Regulatory and
Development Authority ActwaspassedinDecember1999.Thiskeypieceoflegislationcontainsprovisions
fortheestablishmentofanewregulatoryauthority,theInsuranceRegulatoryandDevelopmentAuthority
(IRDA), and three schedules including amendments to the Insurance Act of 1938, the Life Insurance
Corporation Act 1956andtheGeneral Insurance Business (Nationalisation) Act 1972.Theamendmentsto
the 1956 and 1972 acts dispensed with the monopolies of LIC and GIC thus opening the door to private
companies.
In July 2000, the IRDA issued a regulation outlining the registration procedure for new private insurers.
Sincethen24non-lifeinsurersandthree"stand-alone"healthcarespecialistshavebeenregistered.
Othersignificantinsuranceregulationsaresummarisedbelow.
The Foreign Exchange Management (Insurance) Regulations 2000 published 3 May 2000 and
subsequent amendments of 2002 and 2003, related to the purchase of insurances from non-admitted
carriers. Circular No 76 issued by the Reserve Bank of India on 24 February 2004 relates to health
insurances.
Insurance Regulatory and Development Authority (Manner of Receipt of Premium) Regulations 2002 setoutmethodsofpaymentofpremium,inadditiontocash,withoutchangingthebasicrequirementthat
the premium should be paid before the insurer goes on risk. The regulations allow for premium
payments through credit cards, the internet, e-transfer, direct debit and banker's draft and means that
insurersarenowabletodevelopane-commercestrategy.
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Insurance Regulatory and Development Authority (Insurance Brokers) Regulations 2002-stipulatethe
licensingandminimumeducationalqualificationsrequiredforallbrokers.
Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Regulations 2002 set out the licensing and minimum educational qualifications required for all corporate agents, and
effectivelyallowbanksandotherlendinginstitutionstobecomecorporateagents.
Insurance Regulatory and Development Authority (Licensing of Insurance Agents) (Amendment)
Regulations 2002-amendtheoriginallicensingofinsuranceagentsregulationinrespectofcorporate
agentstotakeaccountofthefactthatthereisaseparateregulationforcorporateagents.
Other relevant insurance legislation passed in recent times includes the Insurance Regulatory and
Development Authority (Insurance Brokers) (Amendment) Regulations 2007 which introduces (1) an
amendedtableoffeespayablebybrokersuponapplyingforanoperatinglicenceand(2)annuallicence
fees. The Insurance Regulatory and Development Authority (Micro-Insurance) Regulations 2005 are
designedtoensurethatthebenefitsofinsuranceprotectionreachpotentialclientsofmodestmeansin
ruralIndiaandthemorevulnerablesectionsofthepopulationasawhole.
In2002theIndianparliamentpassedthePrevention of Money Laundering Act.Thelegislationappliesto
every banking company, financial institution and intermediary including the insurance sector. On 31
March 2006 the Insurance Regulatory and Development Authority (IRDA) published its Anti Money
Laundering Guidelines effective from August 2006. Some of the most significant provisions included a
needforinsurerstohaveinplaceinternalpolicies,proceduresandcontrolstoascertainthetrueidentity
of their clients. These include a prohibition on insurers accepting a premium of more than INR 50,000
(USD 1,133) in cash. A subsequent rule exempted insureds whose annual premiums are below INR
100,000(USD2,265)fromtheguidelines.
During2007and2008thefollowingregulationswereintroduced:
IRDA (Reinsurance Cession) (Notification) Regulations 2007
IRDA (Registration of Indian Insurance Companies) (Second Amendment) Regulations 2008
IRDA (Obligations of Insurers to Rural or Social Sector) (Third Amendment) Regulations 2008
IRDA (Obligations of Insurers to Rural or Social Sector) (Fourth Amendment) Regulations 2008
IRDA (Investment) (Fourth Amendment) Regulations 2008.
Inaddition,theIRDAcirculars/guidelinesdescribedbelowwereissued,amongstothersduringthisperiod.
In its Circular 019/IRDA/NL/F&U/Oct 08 the IRDA, referring to its earlier circulars/guidelines of 28
September2006and26March2008,advisedthatithaddecidedtorelaxanumberoftherulesabout
the maintenance of coverages of the erstwhile tariff classes of business in fire, engineering, IAR and
motor(OD),effectivefrom1January2009.
Circular dated 25 August 2008, specified new limits on the payment of commission or brokerage on
generalinsurancebusinesswitheffectfrom1October2008.
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InadditiontolegislationpassedbytheIndianparliamentorregulationsintroducedunderexistinglegislation
by the IRDA, the latter publishes guidelines such as those that were issued on 1 October 2006 for the
conduct of insurance and reinsurance business. These guidelines are applicable to placements and
negotiations initiated after that date including renewals. There is particular emphasis on the manner in
whichintermediariesshouldcarryouttheirbusinessinthisrespect.
Legislative Process
Inordertobecomealaw,abillmustpassthroughbothhouses,anditconvertstoanactonceithasbeen
giventhepresidentialassent.TheactbecomeseffectivefromthedatethatitispublishedintheGazette of
India.Abillgoesthroughfourstepsineachhouse:
introduction
anyofthefollowingmotionscanthenbeconsidered:referredtoaselectcommitteeoftheupperhouse;
referred to a joint committee of both houses; circulated for opinions from both the public, and both
housesofparliament
oncethishasbeencompleted,thebillisreviewedclausebyclause,togetherwithanychangesresulting
fromtheabove
avoteisthentakenonwhetherthebillshouldbepassedintolaw.
Statutory Tariffs
ThepremiumratesfortheIndianMotorThirdPartyInsurancePool(IMPTIP)forcommercialvehiclesare
subject to a mandatory tariff, as is terrorism. The latter applies to fire, engineering and industrial all risks
policiesforbothmaterialdamageandlossofprofits(businessinterruption).
Themarinehullandwarrisktariffswereabolishedon1April2005.Tariffsapplicabletofire,engineering,
motor (except third party only cover), workers' compensation and other classes of business which were
subjecttotariffsatthattimewerewithdrawnon1January2007.
Compulsory Insurances
List of Compulsory Insurances
Motorthirdpartyliability.
Thirdpartyliabilityformanufacturersofhazardousmaterials.
Professionalindemnityfordirectbrokers,reinsurancebrokersandstockbrokers.
Aviationcarriers'liability.
Professionalindemnityformutualfundmanagers.
ResidentialstructuresinMumbai.
Inadditiontotheabove-mentionedwhicharecompulsoryonanationallevel,therearesomeinsurances
that are obligatory locally, such as those for residents' associations in Mumbai (Bombay). It is not clear
whethertherearesimilarregulationsinotherIndiancities.
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Supplementary Information on Compulsory Insurances
InaccordancewiththeprovisionsoftheMotor Vehicle Act 1988,compulsorythirdpartycoverisrequired
fortheownersofalltypesofvehicles,whicharedrivenonthepublichighway.Thecompulsorylimitsare
detailedintheMotorsectionofthisreport.
ThePublic Liability Insurance Act 1991waspassedasadirectresultoftheBhopaldisaster.Itsprovisions

obligethemanufacturersofhazardousmaterialstoinsureagainsttheriskofthirdpartyliabilityarisingout
oftheiractivities.
TheprovisionsoftheInsurance Regulatory and Development Authority (Insurance Brokers and Insurance

Consultants) Regulations 2002 oblige direct and reinsurance brokers to take out professional indemnity
insurance.
According to the regulations of the Securities and Exchange Board of India (SEBI), it is obligatory for
stockbrokers to have a minimum professional indemnity insurance of INR 5 lakhs or INR 500,000 (USD
11,325).
Compulsory aviation carriers' liability is limited to INR 7.5 lakhs or INR 750,000 (USD 16,988) per
passenger.
In its circular of 30 September 2002, addressed to all the country's mutual funds, the Securities and
ExchangeBoardofIndiareiteratedtheneedformutualfundmanagerstoarrangeinsurancecoveragainst
thirdpartylossesarisingfromfinancialerrorsandomissions.Thelevelandtypeofcoverisdeterminedby
the funds' trustees, subject to a minimum level of INR 5 crores (INR 50mn or USD 1.1mn) with certain
exceptions.
Changes in Legislation
Legislative Update
=================================================================================
Update May 2011
On1February2011theIRDAissuedaguidelineoninsurers'increasinguseofoutsourcing.Amongstother
thingstheguidelinesstatethataninsurer'soutsourcingarrangements"neitherdiminishitsabilitytofulfilits
obligationstopolicyholdersnorimpedeeffectivesupervisionbyIRDA."Theauthorityhasaskedinsurersto
restrictoutsourcingtocoreactivitiessuchasclaims,underwritingandpolicyservicingtoguardagainst
majorfinanciallapsesandtoprotectpolicyholders.
=================================================================================
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In order to improve the services offered by insurance agents, the IRDA, by virtue of the provisions of
Circular Ref 31/IRDA/CA/CIR/Sep-09dated2September2009isrequiringagentstostaywithaninsurer
for at least three years. The regulator has also said that renewal commissions should not be paid if an
agent leaves the company within five years of joining it. An agent now needs to obtain a "no objection"
certificatefromhisorherexistinginsurancecompanybeforeheorshecanmovetoanothercompany.
At the end of 2009, the IRDA issued its Corporate Governance Guidelines for insurers. This is a lengthy
andcomprehensivedocumentcontainingacombinationofspecificmeasuresandgeneralguidelinestobe
adopted and implemented by Indian insurers by April 2010. The guidelines are a supplement to the
requirements of the Companies Act 1956, the Insurance Act 1938 and any other law on the basis that
whereanyprovisionsoftheguidelinesaremorerigorous,theywilltakeprecedence.
The IRDA believes that insurers need a corporate governance framework that clearly defines roles,
responsibilities and accountability within the organisation and that contains built-in checks and balances.
Undertheguidelinesinsurersmust,forexample,publishtheremunerationofindependentdirectorsaswell
as fuller details about their activities. Furthermore there are rules that restrict the appointment of close
relatives to the same board of directors. Insurers will be required to make public the composition of their
boardandcommittees,aswellasthequalificationsofthedirectorsandthenumberofmeetingsheld.Each
insurer should nominate their company secretary as the compliance officer whose job will be to monitor
continuingcompliancewiththeguidelines.
ParliamenthaspassedtheWorkmen's Compensation (Amendment) Act 2009whichamongstotherthings

includesachangeofnameforthecurrentlegislationfromWorkmen'sCompensation ActtotheEmployee's
Compensation Act 1923,andanincreaseinbenefits.
Projected Legislation
=================================================================================
Update August 2011
delayedevenfurther.
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InthedraftreportsubmittedbythestandingcommitteetotheMinistryofFinance,thecommitteereminds
thegovernmentofapreviouscommitmentfornotraisingtheceiling.Thecommitteealsostatesthatthere
areadequatefundsavailableforinvestmentinthedomesticinsurancesectorwithouthavingtoresortto
foreigninvestors.ThereportsuggeststhatIndia'sinsurancesectorisstillnotseenasanattractive
investmentanditurgestheauthoritiestotakestepstomakesurethatthepublicwillbecomemore
confidentinsofarasinsuranceinvestmentisconcerned.
Guidelinesof14May2007.TheIRDA Guidelines on Distance Marketing of Insurance Productsapplyto
distancemarketingcarriedoutbyinsurersandintermediariesatthevariousstagesoftheoffer,negotiation
andconclusionofsaleprocesses.
=================================================================================
The Insurance Laws (Amendment) Bill 2008 which proposes a number of major changes including an
increaseinpermissibleforeigninvestmentinlocalinsurancecompaniesfrom26%to49%andprovisions
forforeignreinsurerstosetupbranchesinIndiaisstillbeforeparliamentawaitingtimeforitspassageinto
law.Whenthisreportwasinpreparation,therewasnoclearindicationastowhenthiswouldbe.
The preamble to the bill says that it is to "further amend the Insurance Act 1938, the General Insurance
Business (Nationalisation) Act 1972andtheInsurance Regulatory and Development Authority Act 1999."
Supervision
Insurance Supervisory Authority
Until the 1999 Act established the Insurance Regulatory and Development Authority (IRDA) the non-life
market,consistingofthefourpubliclyownedinsurers(NewIndia,Oriental,UnitedIndiaandNational)was
supervisedonaday-to-daybasisbytheGeneralInsuranceCorporationofIndia(GICRe),whichreported
to the Insurance Department of the Ministry of Finance. GIC Re's accounts were subject to regular
inspectionbythecomptrollerandauditorgeneralofIndia.
The1999 ActsetuptheIRDAtowhichitallocatedthefollowingpowersandfunctions:
the issue of certificates of registration of new insurers together with the renewal, modification,
withdrawal,suspensionorcancellationofsuchregistrations
thelevyoffeesandotherchargesforcarryingoutthepurposesoftheact
the control and regulation of premium rates, terms and conditions that may be offered by insurers in
respect of non-life insurance business; this function is carried out by the IRDA's Tariff Advisory
Committee(TAC)
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thedetailingoftheformandmannerinwhichaccountbooksaremaintainedandstatementsofaccounts
submittedbyinsurers
theregulationofthemaintenanceofsolvencymargins
thecontrolofthepercentageofinsurancebusinesstobeundertakenbytheinsurerintheruralorsocial
sector.
FulldetailsoftheIRDA'spowersandfunctionsaretobefoundinArticle 14ofChapter IVofthe1999 Act.
AnapplicantforanoperatinglicencehastopayaregistrationfeeofINR50,000(USD1,133)totheIRDA.
DuringthepastsixorsevenyearstheIRDAhasbeenbusypreparingandissuingaseriesofregulations
generatedbythe1999 Actandrelatedlegislation.Theseregulationshavecoveredamongstothermatters,
the preparation of financial statements and auditor's reports of insurance companies, life and non-life
reinsurance, investment regulations, licensing of agents and brokers, the establishment of solvency
margins and most significantly, the registration of private insurance companies' regulations (Notification
100).ByallaccountstheIRDAhasprocessedapplicationsfortheregistrationofprivateinsurersinavery
effectivemannersincethefirstweresubmittedinAugust2000.
The authority consists of a chairman, five full-time and four part-time members and reports to the
DepartmentofEconomicAffairsoftheMinistryofFinance.TheIndiangovernmentappointsthemembers.
ThecurrentchairmanisHariNarayanawhotookoverfromCSRaoinJune2008.MrNarayanahadalong
career in the government administrative service, retiring as chief secretary to the government of Andhra
Pradesh.
TheIRDAhasatotalofaround50staff.Themajorityofthoseofmanagerialrankatleasthavebeendrawn
fromtheinsuranceindustryandthereforebringaconsiderableamountofpracticalinsuranceexperienceto
theregulatoryworkoftheauthority.
Statutory Returns
Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's
Report of Insurance Companies) Regulations 2000 were introduced in August of that year and the first
returnsunderthenewregulationsappliedtothefinancialyearending31March2001.Theregulationswere
amended and updated in 2002 and apply to the financial year ending 31 March 2002. They set out the
format and content of returns to IRDA and also cover reinsurers until such time as IRDA introduces
separatemeasures.Insurers'auditsmustbesignedoffwithinthreemonthsoftheendofthefinancialyear
(31March)andreturnssubmittedtoIRDAbytheendofSeptembereachyear.
Itisunderstoodthat,sofar,therehasbeenagoodlevelofcomplianceregardingreturns.Whenthisreport
wasinpreparation,noinformationwasavailableabouttheconsequencesofnon-observationoftherules
correspondingtostatutoryreturns.
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In order to keep pace with international developments, the Indian government has committed itself to
complyingwiththeprovisionsoftheInternational Financial Reporting Standards(IFRS)by2011.TheIRDA
has set up a committee to prepare the way for the insurance industry's response to the introduction of
IFRS.
Nochangeswereknowntobependingwhenthisreportwasinpreparation.
Insolvency Regulation
InaccordancewiththeprovisionsoftheInsurance Act 1938,ifatanytimetheIRDAhasreasontobelieve
that an insurer is acting in a manner likely to be prejudicial to the interests of policyholders, it may, after
appropriate enquiries within the insurer's operation, appoint an administrator to manage its affairs under
IRDAdirectionandcontrol.
The Protection of Policyholders' Interests Regulations 2002 set out the requirements concerning those
termsandconditionsthatmustbeclearlystatedininsurancepoliciesandrelateddocumentsinorderthat
theinsuredisleftinnodoubtastowhereheorshestandscontractuallywiththeinsurer.Noprovisionis
madefortheestablishmentofanyformofcentralfundforcompensatingpolicyholderswhomaysufferfrom
the consequences of an insurer's insolvency and there is no legislation similar to the Policyholder's
Protection ActintheUnitedKingdom.
Consumer Dispute Resolution

Under the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests)
Regulations 2002everyinsurerisrequiredtohaveaproperprocedureinplacetodealwithcomplaintsof
policyholders.Theprocedureisbywayofgrievance/customercomplaintscellswithintheinsurers'internal
organisations.Inaddition,informationinrespectoftheInsuranceOmbudsmanmustbegiventoinsuredsin
theirpolicies.
Insurance policies contain fairly standard arbitration clauses that follow the procedures contained in the
Arbitration and Conciliation Act 1996.
The Insurance Regulatory and Development Authority Act 1999 empowers the IRDA to adjudicate in the
case of dispute between insurers and policyholders. In addition, the Insurance Ombudsman scheme has
been established under Notification of 11/11/98 to deal with disputes as defined in the notification for
personallinesbusinessonly,foramountsnotexceedingINR20lakhsorINR2mn(USD45,300).
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The Insurance Council, which is the administrative body that runs the programme, is responsible for
appointing the 12 ombudsmen who work in different parts of the country. All insurers are subject to their
jurisdiction.Thedecisionsoftheombudsmenarebindingoncompanies,whomusthonourdecisionsgiven
by them within three months. The regulatory functions of IRDA are complementary to the ombudsman
scheme,andIRDAcandealwithanydisputesthatfalloutsidetheombudsman'sjurisdiction.
Whilst decisions of the ombudsman are binding on the insurers, policyholders are not affected. If a
complainantisnotsatisfiedwiththeombudsman'sdecision,thecomplainantmaytakethegrievancetothe
civilcourt,orlodgeacomplaintwiththeconsumerforums,undertheConsumer Protection Act 1986.
Ofthetotalof12,812complaintsin2008-09,theombudsmendisposedof11,417,ofwhich5,586werelife
casesand5,831non-life.Around59%ofthecomplaints,inthecaseoflifeinsuranceand43%inthecase
ofnon-lifebusinessweretreatedasnon-admissible.Ofthetotalcomplaints,theombudsmenmadeawards
in2,645casesanddismissed1,296.In432casesrecommendationsweremadetoinsurersthatsettlement
ofthedisputebemadeattheirend.
Non-Admitted Insurance Regulatory Position
Definition.Non-admitted insurance refers to the placing of insurance outside the regulatory system of the
country in which the risk is located. A non-admitted insurance policy is one that may be issued abroad or
the risk(s) may be included in a global master policy by an insurer unauthorised in that country. An
authorised insurer is one which is permitted to do business in a country (or region) by the local supervisory
authority. Please refer to the text below for the regulations that apply to non-admitted insurance for this
country.
Summary
Non-admittedinsuranceisnotpermittedbecausethelawprovidesthatinsurancemustbepurchasedfrom
locallyauthorisedinsurerswithsomeexceptions.
Legislation
ThelegalprovisionssettingouttherequirementforinsurerstobeauthorisedarecontainedinArticle3of
theInsurance Act 1938andtheIRDA (Registration of Indian Insurance Companies) Regulations 2000.
Thelegalprovisionssettingouttherequirementforriskstobeinsuredwithlocallyauthorisedcompanies
arecontainedinSection 25oftheGeneral Insurance Business (Nationalisation) Act 1972whichincludes
theprovisionsdetailedbelow,amongstothers:
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"NopersonshalltakeoutorrenewanypolicyofinsuranceinrespectofanypropertyinIndiaoranyshipor
othervesseloraircraftregisteredinIndiawithaninsurerwhoseprincipalplaceofbusinessisoutsideIndia
savewiththepriorpermissionofthecentralgovernment."
Whilstthelawreferstospecificclassesofinsurancebusiness,theinferenceisthatotherclassessuchas
liabilityaresubjecttoit.
Other legislation including the Foreign Exchange Management (Insurance) Regulations 2000 prohibits
Indian residents from taking insurance cover from foreign insurers who are not licensed in India, unless
"prior permission of the Reserve Bank of India (for life insurance policies) and the central government
(generalinsurancepolicies)isobtained."
Insurers
Thefollowinginsurancesarequalifiedexceptionstothegeneralprohibitiononnon-admittedplacements:
althoughimportersandexportersofgoodsmaynotpurchasemarinecargoinsurancefromnon-admitted
insurers, international marine cargo may be insured elsewhere, in accordance with the terms of trade
suchasimportsonaCIFbasis
residentsinIndiamayremitfundsforsecuringhealthcareinsurancewithanoverseasinsurer
risks situated in special economic zones (SEZ) provided premiums are paid in foreign currency; any
requirementforlocalapprovalwouldneedtobeestablished
specialexemptionfromthecentralgovernment(IRDA).
The International Comparative Review of Cross Border Risks October 2008 refers specifically to cases
where prior approval for non-admitted insurance is already granted. For example, seafood and other
perishablefood/foodproductexportersmaybuyrejectionriskscoverfromaforeigninsurer.
OtherlegislationincludingtheForeign Exchange Management Act 1999enablestheReserveBankofIndia

tomakenecessaryregulations.
TheForeign Exchange Management (Insurance) Regulations 2000andsubsequentamendmentsof2002

and2003prohibitIndianresidentsfromtakinginsurancecoverfromforeigninsurerswhoarenotlicensed
inIndia.Furthermore"apersonresidentinIndiamaycontinuetoholdanygeneralinsurancepolicyissued
byaninsureroutsideIndiawhensuchpersonwasresidentoutsideIndia".The2003amendmentsgoonto
say"providedfurtherthatwherethepremiumdueonageneralinsurancepolicyhasbeenpaidbymakinga
remittance from India, the policyholder shall repatriate to India through normal banking channels the
maturityproceedsoramountofanyclaimdueonthepolicy,withinaperiodofsevendaysfromthereceipt
thereof."
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Regulations which exempt healthcare insurance from the basic non-admitted rules, include the Foreign
Exchange Management (Current Account Transactions) Rules 2000.InaccordancewithSchedule II, No 10
paymentforhealthcareinsurancefromacompanyoverseasrequiredapprovalfromtheMinistryofFinance
(Insurance Division). On 24 February 2004, however, the Reserve Bank of India issued Circular No 76
whichstipulatedunderArticle 2 (I)entitledRemittance for Securing Insurance for Health from a Company
Abroad that the government's approval would not be required in the future and that authorised currency
dealerscouldpermitsuchremittancesquitefreely.
Local risk definition.Legislationissilentastowhatconstitutesalocalrisk.
Exchange controls. Currency exchange control is an issue for non-admitted placements because if in
casesotherthancargomarineandhealthcare,permissionissoughtfromtheIRDAforexemptionstothe
rules,itisunderstoodthatarequestwouldhavetobemadetotheReserveBankofIndiatoreleasethe
necessaryfundstoeffectthetransaction.TheReserveBankhasremovedrestrictionsonresidentsinIndia
whowishtoremitfundsforsecuringhealthcareinsurancewithacompanyabroad.
Tax.Itisnotknownifpremiumspaidoverseasaretaxdeductibleforthebuyer.
Therearenoissuesregardingtaxdeductibilityasnon-admittedisnotpermittedwithsomeexceptions.
Insurer responsibilities.Asfarasisknown,insurersinvolvedinnon-admittedplacementsdonothaveto
warnbuyersthattheyarenotsubjecttolocalsupervisionbutitwouldbeprudenttodoso.
Multinationals.Theredoesnotappeartobeanylegislationrelatingspecificallytomultinationalinsurance
programmesormultinationalinsurersandsuchinsurancesandinsurersaresubjecttothesamerulesasall
otherinsurancesandinsurers.
DIC/DIL. The legislation does not address the use of global difference in conditions/difference in limits
coversorexcesslayersaboveaprimarylocalpolicy.
Premium taxes.AllpremiumtaxessetoutintheTaxationsectionofthisreportaredueonpremiumsfor
non-admittedinsurance.
Buyers
Insurancebuyerscannotplacetheirbusinesswithnon-admittedinsurersabroadwithqualifiedexceptions
shownunderInsurersabove.
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One senior market source recalls a rare and successful exemption application to the IRDA, which was
madebeforeprivateinsurersreturnedtotheIndianmarketin2000.Thisinvolveda"portpackage"riskfor
which cover was not then available locally. Nowadays cover for just about every type of risk, however
sophisticated,isavailableintheIndianmarket.Mostmarketpractitionersareinagreementthatinpractice
applicationsforexemptionsareunnecessarynow.
Intermediaries
Intermediaries(brokersoragents)havetobeauthorisedtodoinsurancebusiness.
Intermediariesarenotpermittedtoplacebusinessonanon-admittedbasis.
Market Practice
Reliable sources in the market report that some multinational subsidiaries in India do not take out local
insuranceswhentheyknowthattheycanrelyonglobalprogrammesarrangedbytheirheadofficeseven
though this is illegal. "Offshore" insurers paying claims money into India would be behaving in an illicit
mannerifthepaymentreferredtothesettlementofalosswithinthecountry.Suchmoniesmayhavebeen
paidinthepastundertheguiseofaremittanceforinvestmentpurposes.
Generallyspeaking,however,theremittanceofclaimsproceedsfromaforeigninsurertoanIndianinsurer
or third party claimant, in the case of liability policies, would be questioned by the Indian regulatory
authorities, especially if evidence of a corresponding premium payment is unavailable. Furthermore, a
policydocumentissuedoutsideIndiacannotbeadmittedasevidencewithinthecountry,ifitweretakenout
in contravention of the regulations. Also foreign insurers cannot actively participate in the claim
proceedings or step in to conduct a case on behalf of their insured. For these reasons and in order to
ensurecontractcertainty,itiscrucialthatcoverisarrangedlocallyfromanadmittedinsurer.
Marketsourceshavealsoreportedcasesoflocalpoliciesbeingplacedforasuminsuredthatislowerthan
itshouldbeandoffshorepoliciesbeingarrangedforthebalance.Thisdoesnotconformtothespiritofthe
lawonnon-admittedbusinessandrunstheriskoftheapplicationofanaverageclausetothelocalpolicy.
Fines/Penalties
Section 25(2)oftheGeneral Insurance Business (Nationalisation) Act 1972statesthat:
"Ifanypersoncontravenesanyprovisionofsub-section(1),heshallbepunishablewithimprisonmentfora
term, which may extend to one year, or with a fine, which may extend to one thousand rupees, or with
both."
Also the Foreign Exchange Management Act 1999 (FEMA) stipulates that if an Indian insured procures
coverfromaforeigninsurerwithoutrequisiteapproval,itamountstoabreachofFEMAwhichattractsthe
followingsanctions:
a penalty of up to three times the amount involved in the contravention where such amount is
quantifiableoruptoINR200,000(USD4,530)wheretheamountisnotquantifiable
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apenaltyofuptoINR5,000(USD113)perdayforacontinuingcontravention
confiscationofanycurrencysecurityoranyothermoneyorpropertyinrelationtothecontravention.
In addition, the policy would be illegal and hence void. Any action against the foreign insurer could be
difficultiftheinsurerhasnopresenceinIndia.
Fronting
InIndia,itisnotpossibletomake100%frontingarrangements.ThisresultsfromtheprovisionsofChapter
II of the Reinsurance Regulations of July 2000, which define the procedures to be followed for the
reinsurance arrangements of Indian market insurers and begin with the reminder that the arrangements
havetobeguidedbytheneedtoachievemaximumretentionwithinthecountry.
Insurersareobligedtomaintainthemaximumpossibleretentioncommensuratewiththeirfinancialstrength
and volume of business. The Insurance Regulatory and Development Authority (IRDA) is empowered to
require an insurer to justify its retention policy so as to ensure that it is not merely fronting for a foreign
insurer.
All insurers both public and private are obliged to make 10% cessions for all classes of business to the
state-owned professional reinsurer, the General Insurance Corporation (GIC Re). Subsequent to the
obligatorycessions,insurersarerequiredtoofferGICandinsurerswithintheIndianmarketashareintheir
facultativeandtreatysurplusesbeforetheplacementofsuchcessionsoutsidethecountry.
Inthisenvironmentitisunderstandablethatconventionalfrontingisnotarealoption.
Company Registration and Operating Requirements

Establishing A Local Company
TheproceduresforapplyingforalicencetooperateasaninsurancecompanyaresetoutintheInsurance
RegulatoryandDevelopmentAuthority's(IRDA's)Notification No 100,otherwiseknownastheRegistration
of Indian Insurance Companies Regulations 2000.
CompaniesmustfirstbeincorporatedinaccordancewiththeprovisionsoftheCompanies Act 1956,and
registerthemselveswiththeRegistrarofCompanies.TheythenmakeanapplicationtotheIRDAinorder
toobtainacertificateofregistration.TherelevantformsareIRDA/RIandIRDA/R2.
The initial applications must be accompanied by a certified copy of the memorandum and articles of
association of the company, the name, address and the occupation of the directors and principal officer,
and a statement of the class of insurance business proposed to be carried out. A further statement,
showingthesourcesofthesharecapitalisrequired,togetherwithacertifiedcopyofthememorandumof
understanding between the promoters of the company. Also included in the application is the fee which
shouldnotexceedINR50,000(USD1,133)foreachclassofbusiness.
Types of Insurance Organisation

Alllicensednon-lifeinsurersarestockcompaniesinlinewiththecurrentlaw,althoughtheprovisionsofthe
Insurance (Amendment) Act 2002allowco-operativestoentertheinsurancemarket.
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InFebruary2008,theIRDAannouncedthatitwouldnolongerpermitinsurerstooperateasprivatelimited
companies.Theregulatoraskedinsurerswhicharestillregisteredasprivatecompaniesinaccordancewith
theprovisionsoftheCompanies Act 1956toconverttopubliclimitedoperations.Thedecisionisprompted
by the need for greater transparency for insurers' accounts. The private limited status hinders such
transparency because even if companies are unlisted, the annual accounts of a public company are
accessible to public examination at the offices of the Registrar of Companies. In the case of private
companies,however,accountsarenotaccessible.
MutualcompaniesandthebranchesofforeigninsurersarenotpermittedtooperateintheIndianmarket.
Foreign Ownership
=================================================================================
Update August 2011
delayedevenfurther.
=================================================================================
Foreignownershipislimitedto26%holdingsinprivateinsurancecompaniesincorporatedinIndia.
The Insurance Law Amendment Bill 2008 which proposes a number of major changes, including an
increase in permissible foreign investment in local insurance companies from 26% to 49%, is still before
parliamentawaitingtimeforitspassageintolaw.Whenthisreportwasinpreparationtherewasnoclear
indicationastowhenthiswouldbe.
Types of Licence
Licencesaregrantedforlifeornon-lifeoperationsinaccordancewiththeprovisionsofChapter 11, Article
4 of the Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies)
Regulations 2000.Theyarenotavailableforcomposites.
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AnapplicantforanoperatinglicencehastopayaregistrationfeenotexceedingINR50,000(USD1,133to
theIRDA.Uponrenewaltheinsurerpays1/10thof1%ofitsgrossdirectpremiumwritteninIndia,subject
to a minimum of INR 50,000 (USD 1,133) and a maximum of INR 5 crores or INR 50mn (USD 1.13mn).
Renewalisannual,dueonorbefore31December.
Personalaccidentisclassedasnon-life.Noseparatelicenceisrequiredforinwardsreinsurance.
Capital Requirements
The 1999 Act has set a minimum capital for direct insurance companies (life and non-life) of INR 100
crores or INR 1bn (USD 22.65mn) and INR 200 crores or INR 2bn (USD 45.30mn) for professional
reinsurers.
Noproposedchangeswereknowntobependingwhenthisreportwasinpreparation.
Solvency Margins
Inaccordancewiththeprovisionsofthe1999 Act,whichamendedtheInsurance Act 1938,the"required
solvencymargin"shallbethemaximumofthefollowingamounts:
INR50croresorINR500mn(USD11.3mn)(INR100croresorINR1bn(USD22.65mn)forreinsurers)
or
asumequivalentto20%ofnetpremiumincomeor
a sum equivalent to 30% of net incurred claims, subject to credit for reinsurance in computing net
premiums and net incurred claims being actual but a percentage, determined by the regulations, not
exceeding50%;theIRDAhassetaworkingsolvencymarginratio(ratioofactualsolvencymargintothe
requiredsolvencymargin)of1.5forallinsurers.
Inacirculardated31March2006,theIRDAclarifiedinsurers'doubtsaboutthecomputationofsolvency
marginsandconfirmedthatasfarasnon-lifeinsuranceisconcernedthat:
grosspremium-forthepurposesofthesolvencymarginshallbetheaggregateofgrossdirectpremium
andreinsuranceacceptedpremiumand
incurred claims - explanation (ii) to Section 64VA of the Insurance Act 1938 stipulates that the net
incurredclaimsmeanstheaverageofthenetincurredclaimsduringthespecifiedperiodnotexceeding
threeprecedingfinancialyears.
TheIRDAsuggestedthatitisnowclarifiedthat:
thegrossincurredclaimsandnetincurredclaims(inclusiveofIBNRandIBNER)shallbetakenasthe
averageofthepreviousthreeyears(excludingthefinancialyearwithreferencetowhichthesolvencyof
theinsurerisbeingcomputed)andshallinnocasebelessthantheamountsofgrossandnetincurred
claimsforthefinancialyearendingonthereportingdateand
theincurredclaimsshouldalsoincludeclaimspertainingtoreinsuranceaccepted.
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TheIRDA'sTariffAdvisoryCommitteeannouncedinacirculardated4December2006thatithaddecided
that the rates, terms, conditions and regulations applicable to fire, engineering, motor (except third party
only cover), workers' compensation and other classes of business currently under tariffs would be
withdrawnfrom1January2007.
Whilst it had been acknowledged beforehand that this change would be very beneficial to insurance
consumers,majorreinsurershadexpressedconcernaboutthepossibilitythata"detariffed"marketwould
leadtopricewarsandcouldbedetrimentaltothelong-termstabilityoftheindustry.Atthesametimethe
IRDA had announced that it would conduct a monthly check on the solvency margins of non-life
companies.Itsharedthereinsurer'sfearsandhenceitfeltthatamonthlycheckonthecompanies'financial
positionswouldensurethattheywouldnotweaken.Whenthisreportwasinpreparationitwasunderstood
thattheIRDAwasmovingtowardsintroducingaquarterlycheck.
TheIRDAhasexpresseditsinterestinmovingtowardsarisk-basedcapital(RBC)regimeatsomepointin
thefuture.
Reserve Requirements
SubjecttoanychangesthattheIRDAmayintroduceatalaterdate,therulesinforcepriortothe1999 Act
continue to apply in that the unearned premium reserves are 100% of written premiums for marine
businessand40%fornon-marine,althoughinpracticeitisunderstoodthatthelatteris50%.
Reservesareestablishednetofreinsurance.
Investment Regulations
In accordance with the provisions of Section 4 of the Insurance Regulatory and Development Authority
(Investment) (Fourth Amendment) Regulations 2008, "every insurer carrying on the business of general
insuranceshallinvestandatalltimeskeepinvestedhisinvestmentassetsinthemannersetoutbelow:"
Number
Type of investment
Percentage
Governmentsecurities
Notlessthan20%ofinvestment
assets
Governmentsecuritiesorother
approvedsecurities
Notlessthan30%ofinvestment
assetsincludingtheabove
a)Approvedinvestmentsper
relevantlegislation&regulations
Notexceeding55%ofinvestment
assets
b)Housing&loanstostate
governmentsforhousing&fire
fightingequipmentbywayof
subscriptionorpurchaseofbonds
inspecifiedfinancialinstitutions
Notlessthan5%
c)Investmentininfrastructure
Notlessthan10%
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Investmentininfrastructuremeanssubscriptionorpurchaseofbonds/debentures;equityandasset-backed
securitieswithunderlyinginfrastructurewouldqualifyforthepurposesofthisrequirement.
Everyinsurershallsetupaninvestmentcommitteewhichshallconsistoftwonon-executivedirectors.
TheIRDAhasordainedthatinsurancecompaniesthataresetupbylargecorporationsmustrestricttheir
investmentsingroupcompaniesto5%ofassetsinthecaseofnon-lifeinsurersand5%ofcontrolledfunds
inthecaseoflifeoffices.Newinsurersmaynotinvestmorethan10%inthesharecapital,freereserves,
bondsanddebenturesofonecompany,industrialgrouporsector.
Inviewofthelargeexistingholdingsofthestate-ownedinsurersinthecorporatesector,thecorresponding
normshavebeeneasedto20%or10%oftheirtotalassetswhicheveristheless.
State-owned insurers provide funds to the corporate sector via term loans and the underwriting or direct
subscriptionofsharesanddebentures.
Retentions
It is understood that there are no statutory limits on retention levels such as not to exceed 5% of
shareholders'fundsanyonerisk.
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Taxation
Insurance Premium or Policy Taxes and Charges
Thefollowingtaxisapplicable:
Insurance class
Allnon-lifeincluding
reinsuranceexceptexport
marinecargoexportcredit
insuranceandpersonal
accident
Motor
Description of tax
% (unless otherwise stated)
To be paid by
Premiumorservicetax
10.3
Insured
SolatiumFundlevy
0.02
Insurer
Note: the 10.3% tax is made up of 10% service tax and 3% of 10% cess making 10.3% in total. The cess is a charge for education.
Service tax was reduced from 12.36% to 10.3% on 25 February 2009 by Government Notification
8/2009-ST.
ServicetaxischargedonprovidersofservicesincludinginsurersandreinsurersinIndia.Itiscollected
fromtheinsuredandtheinsurerisresponsibleforpayingittothetaxauthorities.
Thereareanumberofotherexceptionstotheservicetax,mainlyrelatingtoagriculturalinsuranceand
includingthefollowing:
hutinsuranceschemes
comprehensivecropinsurancescheme
cattleinsuranceunderintegratedruraldevelopmentprogramme
schemeforinsuranceoftribals
janatapersonalaccidentpolicyandgraminaccidentpolicy
grouppersonalaccidentpolicyforself-employedwomen
agriculturalpumpsetandfailedwellinsurance
smalltransactionsinvolvingpremiumoflessthanINR50(USD1.13)-exceptmotorinsurance
services provided to the United Nations or an international organisation declared by the central
government
services provided to the developer of special economic zones or to a unit of special economic zones
whichsatisfyprescribedconditions.
Inadditiontotheservicetax,stampdutyischargedbytheinsurerbutinthemajorityofcasesisbuiltinto
the premium amount and not shown as a separate tax. For example, in the case of property insurance,
dutyof0.50paiseisaddedtothepremiumifthesuminsuredislessthanINR5,000(USD113)orINR1if
thesumismorethanINR5,000.Inthecaseofamarinehulltimepolicybywayofanotherexample,the
stampdutyis10paisesforeveryINR1,000(USD22.65).
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Taxation
TheSolatiumFundSchemeisaschemeintroducedinaccordancewiththeprovisionsoftheMotor Vehicle
Act to provide for the payment of compensation to the victims of hit-and-run drivers. The fund pays INR
25,000(USD566)intheeventofdeathandINR12,500(USD283)forgrievousbodilyinjury.Claimsmust
besubmittedwithinsixmonthsofthedateoftheaccident.ThefundwhichismanagedbytheNewIndia
AssuranceCoisfinancedbyallnon-lifeinsurersbymeansofalevyof0.02%ofthegrosswrittenpremium
incomeofeachcompany'smotordepartment.
Legislative Update
=================================================================================
Update May 2011
Anewnationalgoodsandservicestax(GST)setforimplementationduringApril2011hasnowbeen
delayed.Theinitialproposaltointroducethetaxwasdraftedin2008andscheduledforimplementationin
April2009butthiswaslatersuspendeduntilthefollowingyear.Ongoingdelayshavefurtherimpactedthe
deadlineandalthoughthecommitteeofstateministersonGSThaveformulatedtheoverallarchitectureof
thenewindirecttaxscheme,strongobjectionshavebeentabledbyseveralstates;theyareconcernedthat
theywillhavenocontroloversettingtheactualtaxrates.Recentpressreportsclaimfinanceministry
officialsbelievethattheGSTregimewillnotcomeintoeffectuntil2012.
=================================================================================
Therehavebeennorecentchangesinlegislationaffectinginsurancetaxation.
Withholding Taxes on Premiums Paid Overseas

Thereisnospecificwithholdingtaxondirectorreinsurancepremiums.
VAT
Thestate-levelsalestaxwasreplacedbyVATwitheffectfrom1April2005inamajorityofIndianstates.
Thenewsystemimposestworatesoftaxat4%and12.5%onmostproductsonwhichsalestaxusedto
belevied.VATappliestogoodsandnotservicesandhenceinsuranceisexempt.
Corporation Tax
TheFinance Act 2007specifiesacorporatetaxof33.99%fordomesticcompanieswithataxableincome
thatexceedsINR10mn(USD226,500).The33.99%ismadeupof30%plusasurchargeof10%plusan
education"cess"of3%.Foreigncompanies,alsowithataxableincomethatexceedsINR10mnpayatax
of 43.23% (40% plus a surcharge of 2.5% plus education cess of 3%). There are lower rates of tax for
companieswithataxableincomeoflessthanINR10mn.
Captives
When this report was in preparation no information was available about alternative risk transfer (ART)
transactionsandcaptives.
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Legal System
Summary and Trends
Although there is evidence to suggest that Indians are becoming more litigation-conscious, especially in
motorthirdpartycases,thegenerallevelofliabilityclaimsawarenessamongstIndia'smassivepopulation
islow.Consequentlythedemandforcorrespondinginsuranceprotectionremainsmodest.
Basis of Legal System

The Indian legal system is based on the 1950 constitution, pre and post-independence statutes and
ordinancesandEnglishCommonLaw.ElementsofthePortugueseCivil CodearestillapplicableinGoa
andenclavessuchasDiuandDamanadministeredbyPortugaluntil1961.Similarly,someFrenchlawis
stillapplicableinPuduchcheri(Pondicherry)anditsdependentenclaves.
The legal system recognises both negligence and strict liability. The best example of the latter is the
legislationinconnectionwiththemanufactureoruseofhazardousmaterials.TheEnvironmental Pollution
Act 1986imposedliabilityonthosethatcausepollutionoftheair,waterorlandfromsuchactivities.Amore
focused piece of legislation followed in 1991, the Public Liabilities Insurance Act as a direct result of the
Bhopaldisaster.
TheLimitation Act 1908prescribesalimitoftwoyearsfortortandthreeyearsforcontractualcases.
Litigiousness
With the exception of motor third party cases, the general level of liability claims awareness amongst
India'smassivepopulationislow.Largesegmentsofthepopulationarestillwhollyignorantoftheirlegal
rightsandeveniftheyunderstoodthem,accesstothelawwouldprovetobefartooexpensiveformostof
them.Inanycase,significantdelaysinthelegalprocessdonotencouragepotentiallitigantsevenifthey
canaffordit.
Access to the Courts

Costs,togetherwithpotentialdelays,determostpeoplefromgoingtotheseniorcourts.Legalaidpaidout
ofpublicfundsisunavailablebutinsomecircumstancesitislikelythatalitigantwouldbegivenassistance
forbothlegaladviceandexpensesbyhisorhertradeunion.Itisunderstoodthatlawyersdonotworkona
contingencynowin,nofeebasis."Ambulancechasing"iscommonplace.
Court Procedure
ThesupremecourtisattheapexoftheIndianjudicialhierarchy,theessentialfeaturesofwhichhavebeen
inheritedfromBritain.
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Legal System
Immediatelybelowthisleveltherearehighcourtsandsubordinatecourtsineachstate.Eachcourtinthe
hierarchy administers the law of the whole country whether made by parliament or the state legislature.
Belowthehighcourteachstateisdividedintoanumberofdistrictsunderthejurisdictionofdistrictjudges
whopresideovercivilcourtsandcourtsofsessions.Thereareanumberofjudicialauthoritiessubordinate
tothedistrictcivilcourts.Onthecriminalsidethehighcourtsupervisestheworkofmagistratesofvarious
classes.Besidescourts,ombudsmen,statutoryclaimsassessmentpanelsandthelikecanmakeawards.
Thedecisionsofthesebodies,however,arenotalwaysbindingontheclaimantwhomaygotothecourtsif
heorsheisnotsatisfied.
TheofficeofanIndianlawyerreportedinacircularof18September2007thaton31Marchofthatyear,it
was noted that there were around 26.5 million cases awaiting rulings in the courts, with an estimated
additionalfourtosixmillioncasesbeforeotherquasi-judicialtribunals.Thetotalnumberofavailablejudges
topresideoverthesecasesis4,500,whichresultsinanaverageofover6,500casesperjudge.Thelaw
firm was of the opinion that against this background, it is not uncommon for cases to take at least eight
years to be finally resolved, and in many cases significantly longer. With such long delays, interest
becomesamajorfactor.Thetypeofawardisatthediscretionofthecourtsandvariesfromcasetocase,
but, according to the lawyer, there is a discernible shift to using interest as a means of compensating a
successful litigant for the delays inherent in the system. Amongst the cases cited to illustrate the use of
interestininsurancecasesistheonedetailedbelow.
InUniversal Paper Mills v The Oriental Insurance Co(2006)thelossoccurredin1993,thelitigationstarted

in1998andadecisionwasfinallytakenin2006.TheadjudicatorawardedapproximatelyUSD74,000to
the insured together with interest of 9% per annum from 1994 (roughly three months after the loss
adjuster'sreportwassubmitted)untilpayment.Atthetimeofthedecision,theinterestpayablewasaround
USD82,000,whichexceededtheprincipalclaimamount.
Thelawfirmcommentedfurtherthatevenwithoutlitigation,interestcanstillbecomeanissue.Ifanofferto
settleismadebyaninsurerandacceptedbytheinsured,theregulator,theIRDA,requirestheinsurer,in
theeventofadelayedpayment,topayinterestat2%abovethebankrateinforceatthebeginningofthe
financialyearinwhichtheclaimismade.
Assessment of Compensation
Court awards are low compared with some other Asian countries such as Hong Kong. In assessing
damagesIndianjudgesoftentakeintoaccountwhetherthedefendantisinsuredornot.Itisthepracticeto
name insurers as co-defendants in court cases and it is understood that in such cases the judge would
probablybemoregenerousincalculatingdamagesthanifnoinsurancewereinplace.
Untilthere-entryofprivateinsurersin2000,theonlyinsurerswerestate-ownedandintheeyesofjudges
quitecapableofpayingeventhemostinflatedofcourtawards.Forthisreasonlowercourtdecisionsare
notusuallyoverturneduponappeal.Whethertheincreasingpresenceofprivateinsurerswillnowhelpto
lessenoreveneliminatethisdistortedprocessstillremainstobeseen.
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Legal System
PunitivedamagesarenotafeatureoftheIndianlegalsystem.
There have been some cases of sexual discrimination in the workplace but insufficient to generate any
demandforinsurancecover.Thereisnoevidenceofclaimsforracialdiscrimination.
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Historical Development
History
19thc
TheinsurancecompanymarketwassetupinIndiabyBritishofficessuchasCommercial
UnionAssurance,whichestablishedanoperationinKolkata(Calcutta)in1862.
1907
NationalInsuranceCowasestablishedinCalcutta.
1923
TheWorkmen's Compensation Actwaspassed.
1938
The Insurance Act consolidated a number of previous ordinances and regulations

concerninginsurance.
1950
Following a report prepared by a committee chaired by Sir Cowasji Jehangir, important

amendments were made to the 1938 act. These included measures to strengthen the
financial structure of insurance companies, particularly life offices following a series of
insolvencies.
1956
Life insurance companies were nationalised and the Life Insurance Corporation of India
(LIC)wasestablishedandgrantedamonopolyofwritinglifebusiness.
1972
Thegovernmentnationalisedallgeneralinsurancebusinessbothdomesticandforeign.
1974
The nationalised companies were merged to form the four subsidiaries of the General
InsuranceCorporationofIndia,namelyNational,NewIndia,OrientalandUnitedIndia.
1994
TheMalhotraCommitteerecommendedtheprivatisationoftheinsuranceindustry.
1999
The Insurance Regulatory and Development Authority Act was passed. It established a
new regulatory authority and approved the entry into the market of private insurers,
abolishing the monopolies previously enjoyed by the state-owned General Insurance
CorporationofIndia(non-life)anditsfoursubsidiariesandtheLifeInsuranceCorporation
ofIndia(LIC).
2000
The first applications for the registration of private insurers, most with minority foreign
shareholders, were processed by the regulator, the Insurance Regulatory and
DevelopmentAuthority(IRDA),andapproved.
2002
RegulationsforthecontrolofbrokerswereissuedfollowingthepassageoftheInsurance
(Amendment) Act.
2007
Non-lifetariffsexceptthoseforcompulsorythirdpartymotorinsuranceandterrorismwere
abolished.
2008
AterroristattackonMumbairesultedinthedeathsof179peopleandextensivedamageto
propertyparticularlytotwoluxuryhotels
The Market Today

Summary and Trends
In 2008-09, non-life insurance premiums amounted to INR 260.1bn (USD 5.37bn) an increase of 5.60%
overthepreviousyear.
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Partofthereasonfortherelativelymodestincreaseandrelatedunprofitabilitywasthefactthatfollowing
theabolitionoftariffs,thefreemarketfounditselfinafiercelycompetitivepricewar,notleastinproperty.In
many cases rates touched rock bottom. This has prompted market practitioners to comment ruefully that
"premiumsarewhatbrokerageusedtobe".Itisunderstoodthatalltoooftentherehasbeenlittleornorisk
underwritingandthatinsurersstrivetoretainimportantbusinessatanyprice.
Atthesametime,underwritingprofitshavebeenveryscarceinspiteofthefactthattherehavebeenno
major natural hazard losses since the catastrophic floods in Mumbai in 2005 when insurance losses
amounted to INR 35bn (USD 794mn). The losses registered by the Indian Motor Third Party Pool which
covers commercial vehicles and is shared amongst all non-life insurers have been having a particularly
negativeinfluenceonresults.
In 2008-09, overall underwriting losses for the non life market as a whole amounted to INR 53.26bn
(USD1.10bn) compared to INR 38.99bn (USD 896.22mn) in 2007-08. (Source: IRDA Annual Report
2008-09)
Overall profit, however, has been achieved thanks to satisfactory investment income at a time when
interestrateshavebeenhigh.
Inthemiddleof2010,insurancesourceswereoftheopinionthatprobablythebottomoftheratingcycle
hadbeenreachedandthatincreaseswouldbegintoemerge.Indeedtherewasalreadysomeevidenceat
that time to suggest that a hardening of rates had started particularly in policies in which coinsurance
partnerscouldagreepremiumincreases.
the General Insurance corporation of India (GIC Re), which tightened its 2010-11 renewal terms for its
domesticcedingcompaniesduetotheverypoortechnicalresults.Thecompanieshavebeenrestrictedas
tothevolumeofcoinsurancebusinessthattheycancedetotheirautomatictreatiesandalsotheamountof
facultative business they can write. This could result in more facultative business being ceded to foreign
markets.TheGICResaysthatthisisworththeprice.
As from 1 April 2010 further remedial measures involving enhanced deductibles for property and
engineeringclasseshavebeenintroducedonavoluntarybasisbytheinsurersthemselves.
Gradually private insurers are eroding the state-owned companies' market share. Should the proposed
increase in permissible foreign ownership (from 26% to 49%) be approved by parliament the impact on
marketsharecouldbeconsiderable.
India-Non-Life(P&C)
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Insofarasspecificnon-lifeclassesareconcerned,demandforconstruction(CAR)andproductliability,for
example,isgrowing.Demandfortheformerisdrivenbythehugenumberofcurrentdevelopmentprojects
in India and the latter by the increasing exposure generated by exported goods, not least those sent to
North American destinations. Motor insurance is written at a loss, and inadequate pricing is a problem.
Third party claims are a major contributor to the unprofitability of this class. Marine cargo is no longer
lookeduponasa"lossleader"butisexpectedtostandonitsownfeetasfarasratingisconcerned.
There is evidence to suggest that because of intense competition for corporate business, more private
insurersareturningto"consumerlines"iepersonalaccident,motor,homeowners'andthelike.
Market Size
The total market size split between life, non-life and personal accident & healthcare premiums in local
currencyandUSDin2009wasasfollows:
Life
Non-Life
Personal accident &

health
Total market
PremiuminINRmn
2,217,912.60
260,098.40
75,064.80
2,553,075.80
PremiuminUSDmn
45,819.91
5,373.38
1,550.77
52,744.06
86.87
10.19
2.94
100.00
%oftotalmarket
Source: Axco Global Statistics

New statistical information may have been included in the appendices
IntheIndianinsurancemarket,personalaccidentisclassifiedasnon-lifebusiness.
Indiawasin26thpositioninAxco's2009non-lifeworldranking,oneaheadofSouthAfricaandonebehind
Turkey.Onaregionalbasis(theIndiansub-continentandsouth-eastAsia)itistheleadingnon-lifemarket
followedbyMalaysiaandThailand.
Thefollowingtablecomparestheannualgrowthratesofnon-lifepremiumincomeinlocalcurrencywiththe
nominalGDPgrowthandinflationratesoverthefiveyearsto2009.
2005
2006
2007
2008
2009
Premiumgrowth(%)
6.53
3.77
27.73
6.31
5.60
NominalGDP
growth(%)
13.89
15.12
14.39
12.67
17.09
Inflationrate(%)
4.25
5.80
6.37
8.35
10.88
The following table shows market growth as split between life, non-life, and personal accident and
healthcareforthefiveyearsto2009.
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New statistical information may have been included in the appendices
Thefollowingpiechartshowsthesplitofnon-lifeincomein2009.
Market Penetration
Market premium as a percentage of GDP and expenditure on a per capita basis expressed in USD are
shownbelowfortheyear2009;comparisonsaremadewithMalaysia,SingaporeandThailand.
India-Non-Life(P&C)
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Life including riders
%
Non-life (P&C)
per capita
Personal accident &

healthcare
per capita
Total
per capita
per capita
India
3.56
38.25
0.42
4.49
0.12
1.29
4.10
44.03
Malaysia
3.21
217.29
1.48
100.22
0.23
15.27
4.92
332.78
Singapore
4.82
1,708.22
1.02
361.68
0.64
227.35
6.48
2,297.25
Thailand
2.81
109.23
1.06
41.25
0.20
7.76
4.07
158.24
Note: PA & healthcare data represents PA & healthcare business other than life riders, whether written by life, non-life or specialist
healthcare insurers. Details of the split of such business (where available) are included in Appendix 1.
Market Participants
Summary and Trends
Followingnewlegislationin1999,privatenon-lifeinsurersbegantoreturntotheIndianinsurancemarket
the following year after an absence of some 30 years. Most companies have multinational insurers as
minority shareholders. Some have separate life operations with the same foreign partners. Often but not
alwaystheIndianmajorityshareholderisamajorcorporateenterprise.
There were 24 non-life insurers operating in July 2010, all but two of which, Reliance and L&T General
InsuranceCoLtdhaveforeignshareholders.Allthecompaniesarejointstockoperations.Inaccordance
with the provisions of Insurance (Amendment) Act 2002, co-operatives may be set up exclusively for the
conductofinsurancebusiness.Thesearesubjecttothesamerulesastocapital,solvencymarginsetcas
jointstockoperations.
Inadditiontothefourpublicsectorinsurers,NewIndia,National,OrientalandUnitedIndia,therearetwo
specialist state-owned direct companies, namely the Export Credit Guarantee Corporation and the
AgricultureInsuranceCoofIndiaLtd.
At this relatively early stage in the evolution of the liberalised market, it is unlikely that there will be any
mergers or acquisitions of existing players. Equally unlikely is any rationalisation amongst the four
state-ownedinsurers.Privatisationatsometimeinthefuture,however,cannotberuledout.
There are certain restrictions in regard to the creation of large financial groups based on banking and
insuranceoperations.UnlessabankhasanetworthofatleastINR5bn(USD113.25mn)itmaynotsetup
an insurance company and banks may not take more than a 5% shareholding in an insurer unless they
meetcertainconditionssuchasrecordingaprescribednetprofitforthreecontinuousyears.
Privatisation/Deregulation
=================================================================================
Update August 2011
India-Non-Life(P&C)
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delayedevenfurther.
=================================================================================
After years of debate since the publication of the Malhotra Committee report in 1994 which first
recommendedderegulationoftheinsurancemarket,theInsurance Regulatory and Development Authority
ActwaspassedinDecember1999.Theactcontainedprovisionsfortheestablishmentofanewregulatory
authority, the Insurance Regulatory and Development Authority (IRDA) and three schedules including
amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956 and the General
Insurance Business (Nationalisation) Act 1972.Theamendmentstothe1956and1972actsabolishedthe
monopoliesofthestate-ownedlifeinsurerLICandthenon-lifeinsurertheGeneralInsuranceCorporation
ofIndia(GICRe)anditsfouroperationalsubsidiaries(NewIndia,National,OrientalandUnitedIndia),thus
openingthedoortoprivatecompanies.
Witheffectfrom3November2000,thenon-lifeGICRewasrelievedofitsholdingcompanystatusandits
foursubsidiariesnowpursueindependentpathswhilstremainingstate-owned.TheMalhotraCommittee's
recommendationthatthegovernmentsell50%ofitsholdinginthesecompanieshasnotbeenacceptedso
farandtherearenoindicationsthattheyarelikelytobeintheforeseeablefuture.
GIC Re has assumed the role of the market's one professional reinsurer and continues to receive
obligatorycessionsof10%ofallclassesofinsurancewrittenbydirectwritersbothpublicandprivate.So
thatGICcanconcentrateentirelyonreinsurance,ithasdivesteditselfofanydirectbusinessthatitwrote
priortoNovember2000.Thisincludedaviationandagriculturalinsurance.InJune2003itwasannounced
that GIC had transferred its entire equity stake in its four former subsidiaries to its owner, the Indian
government,freeofcharge.
The publicly owned Export Credit Guarantee Corporation of India (ECGC) conducts major business for
clients seeking export credit insurance. The corporation also writes political risks insurance for Indian
exportersbutdoesnothandledomesticcredit.AsinthecaseofthefourformersubsidiariesofGIC,there
arenoplanstoprivatisetheoperation.
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The Agriculture Insurance Co of India Ltd was granted an operating licence in 2003 with GIC Re as the
major shareholder with a 35% holding. The new company took over GIC Re's portfolio of agricultural
insurancebusiness.
The insurance market is only partially open to foreign investors. Their participation in India is closely
regulatedinthesensethattheyarelimitedto26%holdingsinprivatedomesticinsurancecompanies.At
thepresenttime,however,proposalsbeforeparliamentcaterforanincreaseto49%.Itisnotknownwhen
anyenablinglegislationislikelytobepassedontothestatutebooks.
Themarinehullandwarrisktariffswereabolishedon1April2005.TheIRDAannouncednewguidelines
forconductingbothlinesofbusiness.
As from 1 January 2007, premium rates applicable to fire, engineering, motor (except third party only
cover),workers'compensationandotherclassesofbusinesspreviouslyundertariffshavebeenwithdrawn.
TheIRDAhaschangeditsmind,however,aboutpolicywordingsetcbeing"detariffed".Thishadbeendue
to take place on 31 March 2008. In its Guideline No 066/IRDA/F&U dated 26 March 2008, however, the
regulator announced that "pending examination of common market wordings proposed by the General
InsuranceCouncil,insurersshallcontinuetousethecoverage,termsandconditions,wordings,warranties,
clausesandendorsementsoftheerstwhiletariffclassesofinsurancecoversuntilfurtherorders".
InitsCircular 019/IRDA/NL/F&U/Oct 08,however,theIRDAreferringtoitsearliercirculars/guidelinesof28

September2006and26March2008,advisedthatithaddecidedtorelaxanumberoftherulesaboutthe
maintenanceofthewordingsoftheerstwhiletariffclassesofbusinessinfire,engineering,IARandmotor
(OD),effectivefrom1January2009.
State Insurance Companies

The 1999 act opened the door to private insurers and broke the monopoly of government-owned
companies, which nevertheless continue to operate. These companies are New India, United India,
OrientalandNational,whicharenolongersubsidiariesoftheone-timestateholdingcompany,theGeneral
Insurance Corporation (now GIC Re) which, since November 2000, has operated separately as a
professionalreinsurerwhilstremaininginthepublicsector.
The four former subsidiaries remain state-owned in spite of the 1994 Malhotra Committee report on the
privatisation of the Indian insurance industry which recommended that the government sold 50% of its
holdinginthecompanies.In2008-09,thecompanieshadanon-lifemarketshareof59.4%.
India-Non-Life(P&C)
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exportersbutdoesnothandledomesticcredit.AsinthecaseofGICanditsfourformersubsidiaries,there
arenoplanstoprivatiseECGCatthistime.
TheAgricultureInsuranceCoofIndiaLtdwasgrantedanoperatinglicencein2003withGICasthemajor
shareholderwitha35%holding.ThecompanytookoverGIC'sportfolioofagriculturalinsurancebusiness.
Market Structure
Beforethere-entryofprivateinsurersintotheIndianinsurancemarketin2000,therewasonlyonenon-life
group,thatofthestate-ownedGeneralInsuranceCorporation(GIC)withitsfoursubsidiarieswithinIndia,
beingNewIndia,UnitedIndia,OrientalandNational.
Privatenon-lifeinsurersare,forthemostpart,jointventuresbetweenmultinationalinsurancegroupsand
local industrial and/or financial enterprises. One well-known example is that between the American
International Group (AIG) and India's TATA conglomerate, which is the country's leading industrial and
business house. One of the most recent entries to the non-life market is the SBI General Insurance Co,
which is a joint venture between the State Bank of India and the Insurance Australia Group, and was
registered by the IRDA on 15 December 2009. The State Bank is India's largest commercial banking
organisationwhilsttheInsuranceAustraliaGroupisaleadingAustraliannon-lifeinsurerinAustraliaitself
andneighbouringNewZealandandagrowingpresenceinAsia.
Two private non-life insurers are wholly Indian, namely Reliance General Insurance Co Ltd and L&T
General Insurance Co Ltd. The former is owned by Reliance Industries, a major group with widespread
interestsinthetextiles,shippingandpetrochemicalfieldswhilstthelatter,registeredasrecentlyas12July
2010, is owned by Larsen & Toubro Ltd (L&T) which is a technology, construction and manufacturing
group. The registration of L&T Generala Insurance brought the total of non-life insurers, both public and
private,upto24.
InIndia,healthcareinsurersareclassifiedasnon-lifecompanies.WiththeregistrationofMaxBupaHealth
InsuranceCoLtdon15February2010,thenumberofsuchinsurersincreasedtothree.Theothertwoare
StarHealthandAlliedInsuranceCoandApolloMunichHealthInsuranceCo.
The state-owned New India, United India, Oriental and National continue to control the major share of
premiumsalthoughtheprivateinsurersaregraduallycatchingup.In2008-09,thestate-ownedcompanies
hadacombinedmarketshareof59%,downfrom74%twoyearsbefore,in2005-06.
Inadditiontothefourpublicsectornon-lifeinsurers,therearetwospecialiststate-owneddirectcompanies,
namelytheExportCreditGuaranteeCorporationandtheAgricultureInsuranceCoofIndiaLtd.
Thereisnorankingofinsurancegroupsasopposedtocompanies.
Thetop10insurancecompaniesrankedbypremiumincomein2009wereasfollows:
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Thefirstfourcompaniesinthe2008-09non-liferankingarestate-ownedasdetailedbelow.
The leading non-life insurer, New India, founded in 1919 by Sir Dorab TATA, was the first fully
Indian-ownedinsurancecompanyinIndia.Ithasareputationforpioneeringinsurancesthatwerenewto
thedomesticmarketintheirday,suchasaviationin1946andcoversforsatellitesin1990.Thecompany,
with 21,000 employees worldwide, has an extensive network of offices throughout India and some 17
countries overseas. It's after-tax profit in 2008-09 was INR 224.14 crores or INR 2.24bn (USD 46.28mn)
comparedwithINR1,401.15croresorINR14.01bn(USD322mn)inthepreviousyear.
National Insurance Co Ltd was incorporated in Kolkata (Calcutta) in 1906. As a consequence of the
General Insurance Business Nationalisation Act 1972,thecompanyabsorbed21foreignand11domestic
insurers and their business. At the present time, the company has a network of about 1,000 offices
throughoutthelengthandbreadthofIndia,mannedbymorethan16,000employees.Foreignoperations
include branches in Nepal and Hong Kong. In 2008-09, the National suffered an after-tax loss of INR
138.68 crores or INR 1.39bn (USD 28.72mn) compared with a profit of INR 163.31crores or INR 1.63bn
(USD37.47mn)inthepreviousyear.
India-Non-Life(P&C)
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UnitedIndiaInsuranceCoLtd,withitsheadofficeinChennai(Madras),hasoperatedintheIndianmarket
for over 70 years, having been incorporated in 1938. As a result of the General Insurance Business
Nationalisation Act 1972, United absorbed 12 Indian insurance companies and four co-operatives in
addition to five foreign entities. It's staff of 18,300 is spread out across India in 1,340 offices. Products
rangefrombullockcartinsurancetothatofspacesatellites.Itcarriestheinsuranceprogrammesofsome
of the country's largest industrial complexes. After-tax profits in 2008-09 were INR 476.05 crores or INR
4.76bn (USD 98.34mn). In 2007-08, profits amounted to INR 631.62 crores or INR 6.32bn (USD
145.27mn).
Thefourthcompanyinthe2008-09non-liferankingwastheOrientalInsuranceCoLtdwithitsheadoffice
inNewDelhi.Thecompanyhas23regionalofficesandnearly900operationalofficesthroughoutIndiaand
branchesinNepal,KuwaitandDubai.Thecompanywasfoundedin1947.Staffnumberabout16,000.It
writes a full range of non-life classes of business whilst specialising in covers for large projects such as
power stations, petrochemical, steel and chemical plants. In 2008-09 the company's after-tax loss
amounted to INR 5,266 lakhs or INR 526.60mn (USD 10.88mn) compared with INR 930 lakhs or INR
93.00mn(USD2.14mn)in2007-08.
Thefirsttwoprivateinsurersinthe2008-09rankingaredetailedbelow.
ICICI Lombard General Insurance Co Ltd is a 74.26% joint venture between ICICI Bank and the
Canadian-based Fairfax Financial Holdings. ICICI Bank is India's second-largest, whilst Fairfax is a
diversified financial corporation engaged in general insurance, reinsurance, insurance claims and
investment management. ICICI Lombard General Insurance received regulatory approval to commence
writingnon-lifebusinessinIndiainAugust2001.Thecompanygotofftoagoodstartbyachievingfinancial
breakeven in its first full year of operations and underwriting breakeven in its second year. The after-tax
profitfor2007-08wasINR1,029mn(USD23.65mn)andINR236.24mn(USD4.88mn)in2008-09.
Bajaj Allianz General Insurance Co Ltd is a joint venture between Bajaj Auto Ltd and Allianz AG of
Germany. The company obtained a licence to operate in India and work in non-life classes, including
healthcare,inMay2001.Ithasofficesin100citiesacrossthecountryreportingtoaheadofficeinPune.
BajajAutoholds74%ofthecompany'ssharesandAllianzholds26%,themaximumpermittedforforeign
investors. In 2008-09, Bajaj Allianz made an after-tax profit of INR 952mn (USD 19.67mn) and INR
1,056mn(USD24.27mn)in2007-08.
Aside from public and private joint stock insurers, there are no other market participants such as
underwritingagencies,brokersholdingbindingauthorities,riskretentiongroups,domesticcaptivesandthe
like.AsfarasisknowntherearenoinsurerswhichhaverepresentativeofficesinIndiaandarewaitingfor
permissiontodobusinessthere.
India-Non-Life(P&C)
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In July 2008, the local press reported that Lloyd's of London had decided to withdraw its main
representative from Mumbai due to its frustration over what it sees as the slow progress being made in
opening up the Indian insurance market to greater foreign investment. The newspaper explained that
Lloyd's had made this decision because so far it had been unable to obtain a licence to write insurance
businesslocallyandthatithadlittleprospectofdoingsointhenearfuture.
ItisestimatedthatLloyd'swritesUSD400mnofbusinessintheIndianmarketfromLondoneachyearbut
believes that it could gain a far greater share of the reinsurance sector if it were allowed to write the
businesslocally.
Market Concentration
The table below shows the aggregate market share of the top five and top 10 companies over the five
yearsto2009.
Market segment
2005
2006
2007
2008
2009
Top5companies
(%)
84.9
81.4
74.7
69.3
67.2
Top10companies
(%)
98.1
98.2
93.8
92.5
89.7
Company Changes
Thefollowingcompanieshaveenteredthenon-lifemarketrecently.
L&TGeneralInsuranceCoLtdisageneralinsurancecompanypromotedbyLarsen&Toubro,Indiawhich,
inspiteofitsname,isalocaltechnology,constructionandmanufacturinggroup.L&TGeneralhasbeen
registeredtooperatewitheffectfrom12July2010.
MaxBupaHealthInsuranceCoLtd,ajointventurenon-lifeinsurerpromotedbyMaxIndiaLtdandBUPA
FinanceplcoftheUnitedKingdomhasbeenregisteredtodobusinessinIndiaasfrom15February2010.
On15December2009,theIRDAregisteredSBIGeneralInsuranceCo,thejointventurebetweentheState
BankofIndiaandtheInsuranceAustraliaGroup,asageneral(non-life)insurer.
Raheja QBE General Insurance Company, which is a joint venture between Prism Cements Ltd of India
andtheAustralianinsurancegroup,QBEHoldings(AAP)PtyLtd,wasauthorisedtodobusinessinIndia
witheffectfrom11December2008.
Thetotalnumberofgeneralinsurersregisteredwiththeauthorityisnow24(18privatecompaniesandsix
publicsectorenterprises).
Total Assets
In the financial years 2007-08 and 2008-09 the total assets of both public and private non-life insurers,
expressedinINRbn,wereasfollows:
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Asset category
2007-08
2008-09
Increase (%)
Investments
710.0
560.0
(21.1)
Loans
19.8
18.4
(7.1)
Fixedassets
7.5
9.6
28.0
Deferredtaxassets
0.8
1.3
62.5
Cashandbankbalance
107.7
65.6
(39.1)
Advancesandotherassets
170.6
166.8
(2.2)
Total assets (INR bn)
1,016.4
821.7
(19.2)
Total assets (USD bn)
23.4
17.0
(27.4)
Source: IRDA Annual Report 2008-09
Technical Reserves
In 2007-08 the reserves and surplus of the public sector non-life insurers amounted to INR 132.48bn
(USD3.0bn)andthoseoftheprivatesectortoINR18.8bn(USD432mn).Thefollowingyear,2008-09,the
publicsectorreserveshadincreasedtoINR137.7bn(USD2.8bn)andthoseoftheprivatecompaniesto
INR28.3bn(USD584mn).
Expense Ratios
The IRDA Annual Report 2008-09 provides the following information about commission and operating
expenses in INR bn. Ratios to what the IRDA describes as "gross direct premium income in India" have
beenadded.
2007-08
2008-09
Operatingexpenses(INRbn)
61.37
73.67
Commissionexpenses(INRbn)
21.57
23.53
Total
82.94
97.20
Ratios(%)
29.8
32.1
Source: IRDA Annual Report
The 2006-07 report stated that out of the 12 non-life insurers at that time, the management expenses of
fiveinsurersin2006-07werewithinthelimitsprescribedunderSection 40coftheInsurance Act 1938,read
with Rule 17E, as against four in 2005-06. There were no comments about compliance in the 2008-09
report.
Theregulationsstatethat"asfrom31December1949,noinsurershall,inrespectofanyclassofgeneral
businesstransactedbyhiminIndia,spendinanycalendaryearasexpensesofmanagementincluding
commissionorremunerationforprocuringbusinessanamountinexcessoftheprescribedlimitsandin
prescribinganysuchlimitsregardshallbehadtothesizeandageoftheinsurer".Rule 17Eofthe
Insurance Rules 1939setsalimitof20%ofpremiums.
Profitability
The underwriting and pre-tax profits/losses for the non-life public and private sector insurers over the
five-yearperiodto31March2009areshownbelow(INRmn).
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Year
Underwriting profit/loss
Pre-tax profit/loss
2009
(53,261)
5,290
% of net earned premium

2.3
2008
(38,994)
29,491
15.3
2007
(25,575)
35,381
22.05
2006
(25,768)
180,370
131.6
2005
(38,865)
190,920
157.5
Underwriting profits have been difficult to attain in recent years due to a combination of unsatisfactory
premium growth and poor claims experience. In 2008-09, premium growth was modest as a result of
free-marketpricingfollowingtheabolitionoftariffs.Competitionbetweeninsurershasbeenfierce,notleast
inproperty.Inmanycasesratestouchedrockbottom.Thishaspromptedmarketpractitionerstocomment
ruefullythat"premiumsarewhatbrokerageusedtobe".Itisunderstoodthatalltoooftentherehasbeen
littleornoriskunderwritingandthatinsurersstrivetoretainimportantbusinessatanyprice.
Atthesametime,underwritingprofitshavebeenveryscarceinspiteofthefactthattherehavebeenno
majornaturalhazardlossessincethecatastrophicfloodsinMumbaiin2005wheninsurancelosses
amountedtoINR35bn(USD794mn).ThelossesregisteredbytheIndianMotorThirdPartyPool,which
coverscommercialvehiclesandissharedamongstallnon-lifeinsurershavebeenhavingaparticularly
negativeinfluenceonresultssinceitsinceptionin2007.
Overallprofit,however,hasbeenachievedthankstosatisfactoryinvestmentincomeatatimewhen
interestrateshavebeenhigh.
Retentions
Netretentionsofnon-lifeinsurersin2008-09andforthepreviousyearwere,accordingtotheIRDA Annual
Reportforthatyear,asfollows:
Department
Net retentions (%)

2008-09
2007-08
Fire
77.35
65.72
Cargo
88.59
77.10
Hull
31.26
18.30
Miscellaneous(total)
96.95
89.63
Engineering
71.26
72.89
Motor
99.99
96.15
Aviation
23.71
48.35
Total
94.45
92.58
Pools
MarketpoolsincludethreethataremanagedbyGICReasfollows.
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Terrorism:Thepoolwassetupasfrom1April2002wheninternationalreinsurerswithdrewtheirsupport
for terrorism insurance. As from that date local underwriters are prepared to cover the risk subject to a
surcharge,whichispassedtothepool.Sincenoreinsurancesupportcouldbeobtainedtoprotectit,the
pool'slimitperlossisrestricted.Witheffectfrom1April2008theoverallliability(materialdamageandloss
of profits) was increased to INR 750 crores or INR 7.50bn (USD 169.88mn) per location/compound with
rates revised upwards. Rates were further increased with effect from 1 April 2009. Cover applies to fire,
engineeringandindustrialallrisks(IAR)policies.Marketparticipantssuggestatleast18physicalrisksare
considered to be too big for the pool and therefore must seek cover in the international market if it is
available.
Marine hull:Thesecondpoolisformarinehullrisks.Cessionsofsurplusesaremadecompulsorilyafter
those made to GIC, the 20% obligatory subject to a maximum of INR 160mn (USD 3.62mn) any one
vessel.
Indian Motor Third Party Insurance Pool:Thispoolbeganoperationson1April2007.Itprovidesthird

party cover with unlimited liability for commercial vehicles. All non-life insurance offices participate
"collectively,mandatorilyandautomaticallyinapoolingarrangement".GICReadministersthepoolunder
the guidance of the General Insurance Council. As to pool shares, GIC Re takes the same share as the
percentage share of statutory cessions, currently 10%. The balance of the share of pooled business is
takenbyallotherpoolmemberinsurersinthesameproportionasthetotalgrossdirectpremiuminIndiaof
eachinsurerfornon-lifebusinessforafinancialyearbearstothetotalmarketgrossdirectpremiumincome
inIndiainrespectofallclassesofnon-lifeinsurancebusinessofallmemberinsurersforthatfinancialyear.
Poolpremiumratesaredictatedbyamandatorytariff.
Thefollowingnewpoolshavebeenproposed:
Nuclear liability: When this report was in preparation, a bill was before parliament which proposes the
establishmentofanuclearliabilitypoolmanagedbyGICRe.Themattercomesupasadirectresultofthe
signing of an Indo-US nuclear agreement in 2008 whereby the US undertook to assist India with the
expansionofanindustrialnuclearprogrammewhichcouldleadtoIndiabeingamajorplayerinthenuclear
energysector.
Earthquake:Planstoestablishanearthquakepoolfinancedbycompulsorycessionsofpremiumfromthe
non-life market and managed by GIC Re still had not been completed by May 2010. Market participants
suggestedthatadequatecoverfromthereinsurancemarketisstillavailable.Callsforanearthquakepool
aroseaftertheGujaratseismicshocksof26January2003.Thesefollowedafull-scaleearthquakeinthe
sameareain2001whenanestimated35,000peopleperishedandinsurancelosseswereestimatedatthe
timeatUSD174mn.
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Insurance Association
Untilafewyearsago,thenon-lifemarketwastheexclusivepreserveofafewstate-ownedinsurersandit
was considered unnecessary to have an association. Since the arrival of the private insurers however,
circumstanceshavechanged.Inearly2001,theindependentGeneralInsuranceCouncilwassetupwith
both public and private sector insurance company members and currently has 23 members (the four
state-ownedcompositeoffices,theExportCredit&GuaranteeCorporation,AgricultureInsuranceCoand
17privatecompanies).Thereisaseparateorganisationforlifeoffices,namelytheLifeInsuranceCouncil.
BothorganisationswereestablishedinaccordancewithSection 64c, Part 11AoftheInsurance Act 1938.
Thecouncilrepresentsthecollectiveinterestsofnon-lifeinsurersinIndia.Itdealswithmattersconnected
withmarketconductandsoundpractices,theprovisionofefficientservicestopolicyholders,theconductof
intermediaries and so on. Amongst other publications the council has issued a Code of Good Business
Practices whose objective is "to set standards of business practice that are good for the image of the
insurersandinthebestinterestsoftheirpolicyholders".Thecode"appliestogeneralinsurancebusiness
andisintendedforobservancebyallexecutivesofinsurers."
Thecouncilhasastaffofsix.Allmembercompaniespayequallytocoverthecouncil'sexpenditure.
The executive committee consists of all the non-life company chief executives together with two
representatives of the Insurance Regulatory and Development Authority. Mr S L Mohan formerly of the
OrientalInsuranceCoisthesecretarygeneral.
In addition to the General Insurance Council, the General Insurance Public Sector Association (GIPSA)
looksaftertheinterestsofthefourstate-ownedinsurersnowthattheyarenolongersubsidiariesoftheGIC
Re.
TheInsuranceInstituteofIndiawasestablishedin1955withthepurposeofpromotinginsuranceeducation
andtrainingthroughoutthecountry.
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Reinsurance
Local Reinsurance Market
Summary and Trends
SincetheestablishmentoftheGeneralInsuranceCorporation(GICRe)in1972,andprobablybeforethat
time, the Indian government has consciously encouraged the retention of as much premium within the
country as is "consistent with financial prudence". This principle was included in the General Insurance Reinsurance Regulations 2000,whichsetoutaseriesofrulesdesignedtoachievemaximumretentions.
GICRelostitsholdingcompanystatusinNovember2000anditsfourformersubsidiaries,National,New
India, Oriental and United India now pursue independent business paths whilst remaining state-owned.
Meanwhile GIC Re has assumed the role of the market's preferred national reinsurer. So that it can
concentrateentirelyonreinsurancebothinIndiaandthroughitsexpandingnumberofoverseasofficesand
trading partners, the corporation has divested itself of the direct aviation and agricultural business that it
wrotepriortoNovember2000.
Currentlyinsurersmake10%obligatorycessionstoGICRe(formerly20%,then15%during2007-08and
10%in2008-09)forallclassesandthesearecalculatedpartlyonaPMLbasisandpartlyonsumsinsured
withafixedtoplimit.
The corporation's other specific work includes the organisation of excess of loss protection for the
obligatorycessionsandtheestablishmentandmanagementofmarketpoolsformarinehull,terrorismand
commercialvehicles.
These are obligations assigned to GIC by the Reinsurance Regulations in addition to its role as a
facultative reinsurer within the Indian market, assisting the regulator, the Insurance Regulatory and
DevelopmentAuthority(IRDA),inmaintainingmarketretentionlevelsandcomplyingwithitsstatutoryduty
toensurethatbusinesswillnotbecededoutsideIndiauntillocalcapacityhasbeenexhausted.
GIC Re's role as preferred national reinsurer limits the business opportunities available to private
professional reinsurers. Thus companies such as Swiss Re, Munich Re and Allianz that have accepted
retrocessionsfromGICReanddirectplacingsforbusinessfromthefourstate-owneddirectinsurershave
doubts as to the commercial viability of establishing joint venture companies in India as permitted by the
Insurance Regulatory and Development Authority Act of 1999. Also the high capital requirements for
reinsurersarenotencouraging.
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Reinsurance
Thereis,however,anopportunitytochangethepresentsituationiftheproposalsnowinparliamentwithin
the Insurance Laws (Amendment) Bill 2008 to permit the opening of branch offices by foreign reinsurers
areaccepted.ThebillreferstoreinsurersthathaveatleastINR5,000croresorINR50bn(USD1.13bn)of
netownedassetstostartupoperations.This,incidentally,wouldbewelcomedbyGICRewhofeelsthata
widerchoiceofreinsurerwouldbebeneficialtothemarket.
In the meantime, it is understood that Swiss Re, Munich Re, Hannover Re, SCOR and Asia Capital Re
have representative offices in India, all of which are in Mumbai except SCOR which is in Chennai and
Munich Re in Calcutta. These offices are liaison operations dedicated to sales and promotion. Any
businessthecompaniesacceptfromtheIndianmarketishandledinEurope.
Growth of "takaful" insurance (insurance practised according to Islamic principles) in many Asian and
MiddleEasterncountriescouldprovidefutureopportunitiesforIndianinsurersabroadanditisunderstood
atleastonelocalinsurerisstudyingreinsuranceaspectsofthisclass,knownas"retakaful".
Local Reinsurance Company Operating Requirements

There are a number of differences between the requirements for insurance and reinsurance companies.
Someofthemajorvariationsareoutlinedbelow.
Capital Requirements
TheInsurance Regulatory and Development Authority Act 1999waspassedinDecemberofthatyear.This
key piece of legislation prescribes a minimum capital of INR 200 crores or INR 2bn (USD 45.30mn) for
reinsurers.Thisistwiceasmuchasthecapitalrequiredfordirectinsurers.
Solvency Margins
Reinsurersarerequiredtomaintainasolvencymargin,whichshallbethehighestofthefollowingamounts:
INR100croresorINR1bn(USD22.65mn)or
asumequivalentto20%ofnetpremiumincomeor
asumequivalentto30%ofnetincurredclaims.
Reserve Requirements
Aprofessionalnon-lifereinsurerwouldhavetomaintainpremiumreservessimilartothoseheldbydirect
writers,thatistosayanunearnedpremiumreserveof100%ofwrittenpremiumformarinebusinessand
40%fornon-marine.
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Outstandingclaimsreservesarecalculatedinthetraditionalmanneronanannualbasis.IBNRsamountto
anadditional5%ofthebasicreserveforpropertyandmarineclaims,10%forallotherclassesofbusiness
withanadditional0.5%toprovideamarginoferror.
State Reinsurance Company

GICReisthestatereinsurancecompanyinthesensethatitisownedbytheIndiangovernmentandhas
been granted a number of commercial privileges arising from the provisions of the Reinsurance
Regulations 2000, but unlike state reinsurance companies in other countries it does not enjoy a
monopolisticstatuseventhoughatthemomentitistheonlyreinsureroperatinginIndia.Privatereinsurers
arefreetosetupcompaniesinaccordancewiththeInsurance Regulatory and Development Authority Act
1999. High capital requirements (USD 45.30mn) for reinsurers are not encouraging and, furthermore,
foreigninvestorsarerestrictedtoanequityholdingofnomorethan26%inanycompany.
are accepted. The bill refers to reinsurers that have at least USD 50 mn in paid-up capital. This,
incidentally,wouldbewelcomedbyGICRewhofeelsthatachoiceofreinsurerwouldbebeneficialtothe
market.
In 2008-09 GIC Re's paid-up capital was INR 4.3bn (USD 88.83mn) and total assets amounted to INR
300.2bn (USD 6.2bn). Its A M Best rating was A- (excellent) when this report was in preparation. The
corporationwasrankedin23rdpositionintheS&PTop 40 Global Reinsurance Groupsin2009bytotalnet
reinsurancepremiums.
On1April2008,themarket'sobligatorycessiontoGICRewasreducedto10%(formerly20%and15%)
and remains at this level. The corporation is reported to be happy with the reductions in these cessions
whichbylawithastoaccept,boththegoodandthebadbusiness.Thereductionandeventualelimination
willallowitmorefreedomtochoose.
GIChasambitiousplanstoexpanditsbusinessintheinternationalreinsurancemarket.Whenthisreport
wasinpreparation,itsforeignoperationsrepresented38%oftotalsalesanddomesticbusiness62%.The
targetistoachievea50/50splitby2015atthelatest.
ThecorporationhassubsidiaryandassociatedcompaniesinKenya,SingaporeandMauritius.Inadditionit
hasbranchofficesinLondonandDubai,andarepresentativeofficeinMoscow.Thereareplanstoopen
newofficesinLabuanandRiodeJaneiro.
In March 2005, it was reported that, together with a select number of Asian reinsurers, GIC Re was
devisinganewratingsystemofinsurancesecurities,theAsianRegionRatingSystem.InMay2010,itwas
reportedthattheprojectwasstillunderconsideration.
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Reinsurance
Local Reinsurance Companies
There are no local reinsurance companies other than GIC Re whose role as preferred national reinsurer
limits the business opportunities available to private professional reinsurers. Thus companies such as
Swiss Re, Munich Re and Allianz that have accepted retrocessions from GIC Re and direct placings for
business from the four state-owned direct insurers have doubts as to the commercial viability of
establishingjointventurecompaniesinIndiaaspermittedbytheInsurance Regulatory and Development
Authority Act of 1999.Alsothehighcapitalrequirementsforreinsurersarenotencouraging.
areaccepted.ThebillreferstoreinsurersthathaveatleastINR5,000croresorINR50bn(USD1.13bn)of
netownedassetstostartupoperations.This,incidentally,wouldbewelcomedbyGICRewhofeelsthata
widerchoiceofreinsurerwouldbebeneficialtothemarket.
InthemeantimeitisunderstoodthatSwissRe,MunichRe,HannoverRe,SCORandAsiaCapitalRehave
representativeofficesinIndia,allofwhichareinMumbaiexceptSCORwhichisinChennaiandMunichRe
in Calcutta. These offices are liaison operations dedicated to sales and promotion. Any business the
companiesacceptfromtheIndianmarketishandledinEurope.
Reinsurance Written by Direct Companies

GICRedominatestheinternalreinsurancemarketacceptingbothvoluntaryandobligatorycessionsfrom
local direct writers. It is understood that the latter handle little or no reinsurance. Instead there is an
increasingamountofcoinsuranceinvolvingboththepublicandprivateinsurers.Thisisclientdriven.With
the recent entry of brokers, it is likely that their influence in regard to the placement of coinsurance will
becomefairlysignificant.
In 2008 the General Insurance Council, which represents the collective interests of non-life insurers in
India,revisedthe2002Coinsurance Agreementbetweenmarketplayerstoacknowledgethearrivalofnew
entrantsandbringthearrangementsuptodate.
International Reinsurance (Inwards)

Since2002GICRehasemergedasa"preferredreinsurer"intheAfro-Asianregionandinthisrespecthas
led the reinsurance arrangements for the insurance markets of Maldives, Kenya, Nepal, Malaysia,
MauritiusandSriLanka.Inaddition,thecorporationhasbeenabletoquotesuccessfullyonanincreasing
number of reinsurance offers that have been received from the international market. GIC Re's foreign
inwardpremiumincomehascontinuedtogrowasaresultofwhataredescribedaseffectivemarketingand
communication strategies. Furthermore, it has taken the fullest advantages possible of the relationships
thatithasbuiltupinavarietyoftargetmarkets.
Bywayofexample,GICReoffersthefollowingunderwritingcapacitiesforproperty,marineandaviationto
itsinternationalclientele.
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Reinsurance
Type Property
Capacity PML (USD mn)
Capacity sum insured (USD mn)
Facultative
20.0
50.0
Treaty
4.0
10.0
Cargo
Any one hull
5.0
5.0
Marine hull & cargo

Facultative
Treaty
5.0
3.0
Any one hull
Liability (any one occurrence)
Airlines
10.0
100.0
Generalaviation
5.0
30.0
Aviation
Facultative
Treaty
0.5anyoneacceptance
Itisworthnotingthatprivateinsurerstendtoberestrictedbyalackofcapacityandconsequentlystriveto
maintainhigherretentionsandprotectthemselveswithexcessoflosscovers.Ontheotherhand,thepublic
sectorinsurerscanaffordtooperatehigherlevelsofretentionsduetotheirhighnetworth.Consequently
theirreinsuranceprogrammesarequitedistinctfromthoseoftheirprivatecompetitors.
PressreportsinJanuary2010saidthat"Whilstthelevelsofretentionsofthestate-ownedcompaniesare
ashighasbefore,thenewentrantshaveretentionsrangingfrom57%to83%."
Company Changes
Therehavebeennorecentcompanychanges.
Local Reinsurance Arrangements

Summary and Trends
The2010-11reinsurancerenewalseasonintroducedstiffertermsandconditionsinthelightofverypoor
underwritingresultsinthedomesticprimarymarket.Followingtheabolitionoftariffs,thefreemarketfound
itself in a fiercely competitive price war, not least in property. In many cases rates touched rock bottom.
This has prompted market practitioners to comment ruefully that "premiums are what brokerage used to
be".Itisunderstoodthatalltoooftentherehasbeenlittleornoriskunderwritingandthatinsurersstriveto
retainimportantbusinessatanyprice.
In so far as the current reinsurance year is concerned, primary insurers have been restricted as to the
volumesofcoinsurancebusinessthattheycancedetotheGICReautomatictreatiesandalsotheamount
offacultativebusinesstheycanwrite.Thiscouldresultinmorefacultativebusinessbeingcededtoforeign
markets.ItisunderstoodthatGICRefeelsthatthisisprobablyworththeprice.
InadditiontothesenewconditionsGICReiscuttingitscommissionratesonobligatorycessions.Property
rates will be cut to 15% from 30% much to the chagrin of the direct insurers. In order to encourage
profitableunderwritingitmaypaybonuses.Inpracticeitisunderstoodthatthenewschemeamountstoa
formofslidingscale.
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Reinsurancepremiumrateshaveremainedfairlystableinspiteofthefactthatglobalrateshavesoftened.
Atthetimeof2010-11renewals,therehadbeenexpectationsthattreatyrateswouldhardeninthelightof
large losses such as the gigantic fire at the Indian Oil Corporation's storage depot in Jaipur in October
2009, and the collapse of a bridge under construction in Kota, Rajasthan in December of that year.
Furthermore,marketpractitionersspeculatedthattheearthquakeinChileinFebruary2010andHurricane
XynthiainFranceataboutthesametimewouldhaveanegativeimpactonreinsurancerates.Intheevent,
somemarketpractitionersreportedthatinfactratesfellinsomecases,asreinsurers'investmentincome
improved and capacity became more abundant. It was reported in the local press that one of the
state-owned insurers had negotiated rates for 2010-11 that were lower overall by almost 5% to 10%
compared with the previous year. Another state-owned insurer said that it had been able to maintain
treaties at the same rate as 2009-10 as there had been no hardening of rates. Capacity for proportional
treaties in the Indian market has reduced. GIC Re is a major player in this market and, as mentioned
previously,hasintroducedconditionsuponrenewal.
Besidestheobviousproblemofalackofproperrisk-basedpricingbytheprimarymarket,currentconcerns
oftheregulatorandmarketpractitionersincludethesecurityofreinsurers,recoverablesandaccumulation
exposures. IRDA is on record as saying that security is sometimes unknown in the case of facultative
placementsandthattherearemanybillionsofINRofoutstandinglossrecoveriesnotleastinthecaseof
thepublicsectorcompanies.Theinsuranceindustrysuffersfromalackofreliabledataonaccumulations
whichleadstoahigheroutgoinreinsuranceprotection.
Regulatory Considerations
There is no requirement for a reinsurance company to be admitted, establish deposits or a trust fund in
India. The General Insurance/Reinsurance Regulations 2000 state that insurers shall place their
reinsurancebusinessoutsideIndiawithonlythosereinsurerswhohaveoveraperiodofthepastfiveyears
countingfromtheyearprecedingforwhichthebusinesshastobeplaced,enjoyedaratingofatleastBBB
(withStandard&Poor)orequivalentratingofanyotherinternationalratingagency.Placementswithother
reinsurers shall require the approval of the IRDA. Insurers may also place reinsurances with Lloyd's
syndicatestakingcaretolimitplacementswithindividualsyndicatestosuchsharesasarecommensurate
withthecapacityofthesyndicate.
The IRDA stipulates that every insurance company needs a comprehensive and competent reinsurance
programmeinordertoworkusefullyforthemaintenanceofsolvency.AsaconsequencetheIRDArequires
everyinsurertosecuretheapprovalofitsboardofdirectorsforitsreinsuranceprogramme.Furthermore
the regulations oblige the insurer to file its plans for its reinsurance programme for the ensuing year. In
addition the insurer is required to file the treaty slips or cover notes corresponding to the planned
reinsurancewithin30daysofthecommencementoftheforthcomingfinancialyear.Thesemeasuresdraw
attentiontotheimportanceofinsurershavinganefficientreinsuranceprogramme,becausetheirsolvency
isassessedonanetofreinsurancebasis.
Chapter IIofthe2000regulationslaysdownthefollowingguidingprinciplesandobjectivesforsettingupa
reinsuranceprogramme:
toachievemaximumretentionwithinthecountry
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todevelopadequatecapacity
tosecurethebestpossibleprotectionforthereinsurancecostsincurred
tosimplifytheadministrationofbusiness.
andvolumeofbusiness.TheIRDAisempoweredtorequireaninsurertojustifyitsretentionpolicysoasto
ensurethatitisnotmerelyfrontingforaforeigninsurer.
On1April2008,themarket'sobligatorycessiontoGICRewasreducedto10%(from20%originally,then
15% for the financial year 2007-08). The corporation is reported to be happy with the reductions in
obligatory cessions which by law it has to accept, of both good and bad business. The reduction and
possibleeventualeliminationofcessionswillallowitmorefreedomtochoosebusiness.
Subsequent to the obligatory cessions, insurers are required to offer GIC and insurers within the Indian
market a share in their facultative and treaty surpluses before the placement of such cessions outside
India.Inthisrespectforeigninsuranceshareholdersinjointventurecompaniesarenotpermittedtocede
morethan10%oftheirreinsurancetotheirheadoffices.
TheregulationscalluponGICtoorganisedomesticpoolsforreinsurancesurplusesinfire,marinehulland
other classes "in consultation with all insurers and assist in maintaining the retention of business within
Indiaasclosetothelevelachievedfortheyear1999-2000aspossible".Sofaronlyamarinehullanda
terrorism pool have been set up. Nothing has been established for fire, for example, and it is likely that
plansforsuchapoolhavebeenquietlydropped.
More recently the IRDA set up a third pool (Indian Motor Third Party Insurance Pool) which came into
operationon1April2007.Thisprovidesthirdpartycoverwithunlimitedliabilityforcommercialvehicles.All
non-lifeinsuranceofficesparticipate"collectively,mandatorilyandautomaticallyinapoolingarrangement".
Plans to establish an earthquake pool financed by compulsory cessions of premium from the non-life
marketandmanagedbyGICRestillhadnotbeencompletedbyMay2010whenenquiresweremadein
the market. In any case, local insurance practitioners have suggested that adequate cover from the
reinsurancemarketisstillavailable.
The Insurance Laws (Amendment) Bill 2008 which proposes a number of major changes includes a
proposalthatforeignreinsurersbeallowedtoopenbranchesinIndiawithoutenteringjointventureswith
local companies. The bill refers to reinsurers that have at least INR 5,000 crores or INR 50 bn (USD
1.13bn)ofnetownedassetstostartupoperations.This,incidentally,wouldbewelcomedbyGICRewho
feelsthatawiderchoiceofreinsurerwouldbebeneficialtothemarket.
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Reinsurance
Non-admitted
There is no requirement for a reinsurance company to be admitted, establish deposits or a trust fund in
India. The General Insurance/Reinsurance Regulations 2000 state that insurers shall place their
reinsurancebusinessoutsideIndiawithonlythosereinsurerswhohaveoveraperiodofthepastfiveyears
countingfromtheyearprecedingforwhichthebusinesshastobeplaced,enjoyedaratingofatleastBBB
(withStandard&Poor)orequivalentratingofanyotherinternationalratingagency.Placementswithother
reinsurers shall require the approval of the Authority. Insurers may also place reinsurances with Lloyd's
syndicatestakingcaretolimitplacementswithindividualsyndicatestosuchsharesasarecommensurate
withthecapacityofthesyndicate.
Whenthisreportwasinpreparation,noinformationwasavailableastowhetheraninsurertakescreditfor
accounting/solvencymarginpurposesforreinsuranceeitheradmittedornon-admitted.
Reinsurance Statistics
The most relevant available information is that prepared by the market reinsurer, GIC Re, for its own
operation,asfollows.FiguresareexpressedinINRmn.
2007-08
2008-09
Netpremiumincome
83,111
74,023
Netincurredclaimsratio(%)
72.3%
83.9%
Underwritingloss
(9,274)
(2,134)
Some 62% of GIC Re's net premium income emanates from Indian business and 38% from foreign
sources.
Foreigninwardsreinsurance(excludingaviation)premiums(INRbn)andlossratioswereasfollows:
2001-02
2002-03
2003-04
2004-05
2005-06
Earnedpremium
1.6
6.5
6.8
8.6
8.9
Incurredclaims(%)
100
64.6
60.3
74.4
84.7
Retentions
Netretentionsofnon-lifeinsurersin2008-09andforthepreviousyearwere,accordingtotheIRDA Annual
Reportforthatyear,asfollows:
Department
Net retentions (%)

2008-09
2007-08
Fire
77.35
65.72
Cargo
88.59
77.10
Hull
31.26
18.30
Miscellaneous(total)
96.95
89.63
Engineering
71.26
72.89
Motor
99.99
96.15
Aviation
23.71
48.35
Total
94.45
92.58
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Itisworthnotingthatprivateinsurerstendtoberestrictedbyalackofcapacityandconsequentlystriveto
maintainhigherretentionsandprotectthemselveswithexcessoflosscovers.Ontheotherhand,thepublic
sectorinsurerscanaffordtooperatehigherlevelsofretentionsduetotheirhighnetworth.Consequently
theirreinsuranceprogrammesarequitedistinctfromthoseoftheirprivatecompetitors.
PressreportsinJanuary2010saidthat"Whilstthelevelsofretentionsofthestate-ownedcompaniesare
ashighasbefore,thenewentrantshaveretentionsrangingfrom57%to83%."
Local Risk Sharing

As part of the 2010-11 renewal terms, GIC Re has imposed restrictions on the volume of coinsurance
business that primary insurers can cede to their automatic treaties. The restrictions are outlined in a
coinsurancelimitationclauseattachedtothereinsurancecontractwhichreadsasfollows:
When coinsurance between one or more companies exists whether declared in one policy or several
independentpolicies,thereinsurancecapacityfixedinnumberoflinesinthereinsurancecontractshall
belimitedasunder:
ForriskswithatotalsuminsuredanyonelocationuptoINR25bn:Cessioninrespectofcoinsurance
business100%oftreatylimit
ForriskswithtotalsuminsuredanyonelocationoverINR25bn:
Coinsurance share
Capacity (%)
Upto20%
40
20%to39%
60
40%andabove
100
Coinsurancelimitsaretobeappliedtoallsections.
The effect of this is to drive facultative reinsurance overseas, but GIC Re does not wish to see local
insurersuseuptheirowncapacityincoinsuranceandfacultativearrangements.
Moreoftenthannotcoinsuranceisclientdriven.
MarketpoolsincludethreethataremanagedbyGICReasfollows.
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Terrorism.Thepoolwassetupasfrom1April2002wheninternationalreinsurerswithdrewtheirsupport
for terrorism insurance. As from that date local underwriters are prepared to cover the risk subject to a
surcharge,whichispassedtothepool.Sincenoreinsurancesupportcouldbeobtainedtoprotectit,the
pool'slimitperlossisrestricted.Witheffectfrom1April2008theoverallliability(materialdamageandloss
of profits) was increased to INR 750 crores or INR 7.50bn (USD 169.88mn) per location/compound with
rates revised upwards. Rates were further increased with effect from 1 April 2009. Cover applies to fire,
engineeringandindustrialallrisks(IAR)policies.Marketparticipantssuggestatleast18physicalrisksare
considered to be too big for the pool and therefore must seek cover in the international market if it is
available.
Marine hull. The second pool is for marine hull risks. The latest information suggests that cessions of
surpluses are made compulsorily after those made to GIC, the 20% obligatory subject to a maximum of
INR160mn(USD3.62mn)anyonevessel.
Indian Motor Third Party Insurance Pool.Thispoolbeganoperationson1April2007.Itprovidesthird

party cover with unlimited liability for commercial vehicles. All non-life insurance offices participate
"collectively,mandatorilyandautomaticallyinapoolingarrangement".GICReadministersthepoolunder
the guidance of the General Insurance Council. As to pool shares, GIC Re takes the same share as the
percentage share of statutory cessions, currently 10%. The balance of the share of pooled business is
takenbyallotherpoolmemberinsurersinthesameproportionasthetotalgrossdirectpremiuminIndiaof
eachinsurerfornon-lifebusinessforafinancialyearbearstothetotalmarketgrossdirectpremiumincome
inIndiainrespectofallclassesofnon-lifeinsurancebusinessofallmemberinsurersforthatfinancialyear.
Poolpremiumratesaredictatedbyamandatorytariff.
Thefollowingnewpoolshavebeenproposed.
Nuclear liability. When this report was in preparation, a bill was before parliament which proposes the
establishment of a nuclear liability pool managed by GIC. The matter comes up as a direct result of the
signing of an Indo-US nuclear agreement in 2008 whereby the US undertook to assist India with the
expansionofanindustrialnuclearprogrammewhichcouldleadtoIndiabeingamajorplayerinthenuclear
energysector.
Earthquake.Planstoestablishanearthquakepoolfinancedbycompulsorycessionsofpremiumfromthe
non-life market and managed by GIC Re still had not been completed by May 2010. Market participants
suggestedthatadequatecoverfromthereinsurancemarketisstillavailable.Callsforanearthquakepool
aroseaftertheGujaratseismicshocksof26January2003.Thesefollowedafull-scaleearthquakeinthe
sameareain2001whenanestimated35,000peopleperishedandinsurancelosseswereestimatedatthe
timeatUSD174mn.
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Treaty Reinsurance
TheGICsurplustreatiesareopentoallinsurersafterthe10%eachandeveryriskobligatorycession.The
treaties are placed partly with GIC itself and partly overseas. Insurers' retentions vary considerably. The
reservesretainedundertreatiesare50%inthecaseoffireandmiscellaneousand100%undermarineand
hull.
The 10% obligatory cession for the new reinsurance year 2010-11 was confirmed in a circular from the
regulator, the IRDA, on 8 February 2010. The IRDA also ruled that where the original insurance liability
exceeds the sum insured for each specified class of business, the percentage of the insurance to be
reinsuredwithGICReshallbereducedtotheextentnecessarytolimitthesuminsuredfortheshareofthe
GICRetotheamountstatedinthetablebelow.AhighercessionmaybemutuallyagreedbyGICRewith
theinsurerconcerned.
Class
Fire,IAR,largerisks
Limit of cession in sum insured

INR500croresorINR5bn(USD
113.25mn)(suminsured(MD&LOP)
perrisk)
Marinecargo
INR25croresorINR250mn(USD
5.66mn)perpolicy
Marinehull
9.06mn)pervessel
War&SRCC
9.06mn)pervessel
Aviation
Oil&energy
Allliabilityproductsexcludingfinancial
liability
67.95mn)perriskonhulland
correspondingpercentageshareon
otherinsurances
INR37.50croresorINR375mn(USD
8.49mn)suminsuredperrisk
INR12.5croresorINR125mn(USD
2.83mn)perpolicyincludingUS
5.66mn)perpolicyexcludingUS
Financiallines
5.66mn)suminsuredperevent
Othermiscellaneous
Nolimit
Machinerybreakdownboilerexplosion
andrelatedLOP
22.65mn)perrisk
CAR&EAR
67.95mn)perrisk(MD&LOP)
Therearenolimitsonmotor,workers'compensation,aviationhullorliabilityandmiscellaneous.
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Bothlocalandforeignmarketsareusedfortreatyreinsurance.Inthecaseofthelatter,however,cessions
canbemadeonlyafterlocalcapacityhasbeenexhaustedtothesatisfactionoftheregulator(IRDA).As
the authorities are very particular about this, it is worth drawing attention to the corresponding rules as
outlinedintheReinsurance Regulations 2000 (Chapter 11, Sections 7 & 9)whichstateasdetailedbelow.
Section 7: "Insurers shall place their reinsurance business outside India with only those reinsurers who
haveoveraperiodofthepastfiveyearscountingfromtheyearprecedingforwhichthebusinesshastobe
placed, enjoyed a rating of at least BBB (with Standard & Poor) or equivalent rating of any other
international rating agency. Placements with other reinsurers shall require the approval of the Authority
(IRDA).InsurersmayalsoplacereinsuranceswithLloyd'ssyndicatestakingcaretolimitplacementswith
individualsyndicatestosuchsharesasarecommensuratewiththecapacityofthesyndicate."
Section 9:"Surplusoverandabovethedomesticreinsurancearrangementsclasswisecanbeplacedby
theinsurerindependentlywithanyofthereinsurerscomplyingwithsection (7)subjecttoalimitof10%of
the total reinsurance premium ceded outside India being placed with any one reinsurer. Where it is
necessary in respect of specialised insurance to cede a share exceeding such limit to any particular
reinsurer,theinsurermayseekthespecificapprovaloftheAuthoritygivingreasonsforsuchacession."
Latestinformationsuggeststhatpropertytreatycapacityinthemarketincludingcatastrophiccoversvaries
between INR 187 crores or INR 1.87bn (USD 42.36mn) and INR 525 crores or INR 5.25bn (USD
118.91mn), previously INR 421 crores or INR 4.21bn (USD 95.36mn), depending upon the insurer's net
retentionandnetworth.
Another example of treaty arrangements in the Indian market is that for marine hull business for which
coverisarrangedbywayofa10%compulsorycessiontoGICandafurther20%tothepool.TheIndian
MarketSurplusTreatyhasacapacityofINR80croresorINR800mn(USD18.12mn).
Facultative Reinsurance
BecauseoftherestrictionsplacedontheobligatorycessionstoGICRebytheIRDA,insurershavebeen
reminded that before making any facultative placements overseas, above the statutory cessions, every
insurershalldemonstratethateffortshavebeenmadetoplacesuchexcesswithintheIndianmarket.Itis
understood that in practice the amount of facultative business ceded overseas has increased due to the
restrictionsontheobligatorycessions.
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Reinsurance
When,forwhateverreason,thereisalegitimateneedforfacultativereinsurance,thelocalmarketresorts
to the use of both proportional and excess of loss facultative arrangements in the case of non-tariff
business and specifically in classes such as energy, product and professional liability. Both GIC and
overseas reinsurers handle such business. In addition there is a limited amount of inter-company
exchanges within the domestic market. Reinsurance brokers at home and abroad are often employed to
assistinplacingbusiness.Currentfacultativeratesremainsteadybutinrecentyearscommissionsinfire
andengineeringhavedroppedfrom30.0%to10%and22.5%to15%respectively.
Catastrophe Reinsurance
Insurers arrange excess of loss reinsurance to protect their retentions through GIC Re with surpluses
placed in overseas markets. Retentions and limits vary considerably. The retentions of some of the new
private companies are quite low due to modest capitalisation. Catastrophe reinsurance includes
reinstatement clauses. No multi-year programmes are involved. Excess covers are placed with both GIC
andoverseasmarkets.Themostcommonexclusiontothecoveristerrorismforwhichaseparatepoolhas
beensetup.
GICRehasacatastrophicperilcoverinplaceforalimitofINR850croresorINR8.50bn(USD192.53mn).
An additional earthquake peril protection for INR 750 crores or INR 7.50bn (USD 169.88mn) is available
together with a marine cover for INR 250 crores or INR 2.50bn (USD 56.63mn). Protection has been
arrangedforpersonalaccident,oilandenergybusiness.
Subsequent to the catastrophic losses generated by the Mumbai floods of July 2005, GIC Re purchased
additional cover in September 2005 and many direct insurers have bought "make-up" cover (enhanced
cover).
With an increased use of models, the market is seeing some increase in demand for earthquake
reinsurance. Some companies are seeking catastrophe excess of loss cover for this peril on a
"stand-alone"basis.
Alternative Risk Transfer

Duringthefinancialyear2007-08,GICReenteredintoanalternativerisktransfer(ART)agreementwith
SwissReinAmericaforprovidingthefollowing:
topendumbrellaprotectionfordomesticbusinessand
takingexposurefromnetretainedsharesonotherprotections.
The two contracts were combined and renewed for a three-year period from 1 May 2007 with improved
terms for a cover of INR 200 crores or INR 2bn (USD 45.30mn) for domestic and USD 20mn for foreign
business.AccordingtoGICRe,"thisarrangementprovidesacost-effectivecomplementtothetraditional
excessoflossprotectionandwouldresultinsignificantbenefittotheCorporation,whenrealizedattheend
ofthecontractperiodanditwillbeaccountedattheendofthecontractperiod".Atthetimethisreportwas
inpreparation,noinformationwasavailableastowhetherthecontractswererenewedinMay2010.
Treaty Reinsurance Commission

Theinformationfrommarketsourcessuggeststhatcommissionratesareasfollows(%):
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Reinsurance
Fire(reciprocal)
30.0
Fire(non-reciprocal)
33.0
Engineering
30.0
Marinecargo
25.0
Marinehull
27.5
Aviation
20.0
In2008-09commissionsinfire(non-reciprocal)andengineeringreducedfrom40%and39%respectively
to33%and30%.
Atatimewhenunderwritingprofitsarescarce,GICRehasbeencuttingitscommissionratesonobligatory
cessions. As from March 2010, fire rates, for example, have been cut to 15% from 30% much to the
chagrinofthedirectinsurers.Inordertoencourageprofitableunderwriting,itmaypaybonuses.Inpractice
itisunderstoodthatthenewschemeamountstoaformofslidingscale.
Facultative Reinsurance Commission

Thefollowingratesarecurrent(%):
Fire
10.0
Engineering
15.0
Marinecargo
22.5
Marinehull
20.0
Miscellaneousaccident
30.0
Sincethebeginningof2007,commissionsinfireandengineeringhavedroppedfrom30.0%to10.0%and
from22.5%to15.0%respectively.
Distribution
Reinsurance brokers at home and abroad are often employed to assist in placing facultative business.
Generallythelocalmarketresortstotheuseofbothproportionalandexcessoflossfacultativecoversin
thecaseofnon-tariffbusinessandspecificallyinclassessuchasenergy,productandprofessionalliability.
Itisestimatedthataround10%to15%oftheinternationalinwardsreinsuranceisplacedwithGICdirect
andtherestbybrokers,bothdomesticandthosebasedoverseas.
TheIRDA's"statusofinsurancebrokers"listof30June2010containsthenamesof302brokersofwhich
24hadlosttheirlicencesinthecurrentthree-yearrenewalprocessand64weredescribedashavingthe
"renewalapplicationunderscrutiny"or"regulatoryactionisunderprocess".Oftheremaining214brokers
withlicences,sixarespecialistreinsurancebrokersand208retailbrokers.Somebrokersarejointventures
withforeigncompanieswhoseshareholdingsarelimitedto26%.
The IRDA issued detailed guidelines effective from 1 October 2006 for the conduct of insurance and
reinsurancebusiness.Theguidelinesareapplicabletoplacementsandnegotiationsinitiatedafterthatdate
including renewals. There is particular emphasis on the manner in which intermediaries should carry out
theirbusinessinthisrespect.
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Summary and Trends
Withtheintroductionofaseriesoflegislativereformsinrecentyears,theIndianinsurancemarketnowhas
afullrangeofdistributionchannelsalthoughmanyofthemstillhavesomewaytogobeforetheystartto
makeameaningfulimpact.
Since the first licences were issued to applicants in early 2003, brokers have made steady progress in
increasingtheirmarketshare,particularlyinsofarascorporatebusinessisconcerned.Duringthepasttwo
years or so, however, the intense competition between insurers since the abolition of tariffs has sent
premium rates in a downward spiral resulting in a fall in revenue and reduction in corresponding
commissionincomeforallintermediaries,bothbrokersandagents.Thisisatatimewhensomeadditional
incomecanbeexpectedfromthefactthat,toanincreasingextent,largerdirectclientsaretransferringtheir
business to brokers because of claims-handling problems. These, according to market sources, arise all
toooftenwhendealingdirectwithaninsurer.
In view of legal restrictions on agents' activities in the past, their non-life market share is likely to be
relativelysmallalthoughtherearenostatisticstosupportthisassertion.
Asfarasotherdistributionchannelsareconcerned,marketpractitionersareconfidentthatbancasssurance
has a bright future for the distribution of insurance products such as personal lines and life. So far
bancassurancehasgrownfairlywellwithbankstakingadvantageoftheirextensivebranchnetworksthat
givetheinsurersaccesstoalargeclientbase.Thisisparticularlyimportantintheruralareas,asoperating
licenceconditionsrequireinsurerstomeetsalestargetsimposedbyIRDAforbusinesssoldintheseareas.
Insurers have been hesitant to engage in e-commerce due to low levels of personal computer use and
access to the internet. On the other hand there has been increased activity in so far as telesales are
concerned.Thisisparticularlysoatthetimeofrenewal.TATAAIGandRoyalSundaramamongstothers
havelaunchedtelesalestodistributemotorandhouseholdinsurance.Otherdirectmarketingincludessales
bydirectmailing,whichhasbeencarriedoutsporadically.Enthusiasmforthesetypesofsalesshouldbe
temperedbythefactthatmanyIndianconsumersstillshowapreferenceforface-to-facesales.
WhereasIRDAstatisticsshowmarketsharebydistributionchannelforthelifesector,nosuchinformation
ispublishedfornon-lifebusiness.
It is estimated, however, that from 15% to 20% of the market's gross non-life income is secured through
brokers,whilstbancassurancecouldgenerateatleast35%.Inviewofpastrestrictionsontheiractivities,
theagents'marketshareislikelytobefairlysmall.
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Direct Handling
Untilfairlyrecentlymostdirectbusinesswaspromotedbydevelopmentofficerswhowereremuneratedby
insurerspartlybysalaryandpartlybycommission.Theseofficerswerebeingphasedoutinanticipationof
brokersandotherintermediariestakingovermuchoftheirbusiness.Undertheschemetophasethemout
development officers were being given the chance to retire from the market in accordance with a
programme that allowed them to withdraw with a package compensation deal. If they did not accept the
deals then their employers could oblige them to work in rural areas or small towns away from large
business opportunities. Development officers are still employed by the four public sector insurance
companiestosuperviseagencyteamsandinsomecasestosecuredirectbusiness.
In order to penetrate the direct market both public and private insurers have branch offices although the
four public companies have a much greater number of offices and wider geographical spread than the
recently established private offices. The latter tend to have large client departments run by teams of
specialiststaff.
E-Commerce
=================================================================================
Update August 2011
Guidelinesof14May2007whichmadeanexceptiontotherulethatonlylicensedagentsorother
intermediariescan"solicitorprocure"insurancebusinessandhencepermittedpromotionalactivitiestobe
carriedoutviacoldcallingby"otherlicensedintermediaries".
TheIRDA Guidelines on Distance Marketing of Insurance Productsapplytodistancemarketingcarriedout
byinsurersandintermediariesatthevariousstagesoftheoffer,negotiationandconclusionofsale
processes.Thedefinitionof"distancemarketing"includeseveryaspectofsolicitation(includinglead
generation)andsaleofinsuranceproductsthroughvoicewhichincludestelephonecalling,shortmessage
services(textmessaging)andelectronicmodeswhichencompassese-mail,internetandinteractive
television.Physicalmodes,includingdirectpostandnewspaperandmagazineinsertsandsolicitation
throughanymeansofcommunicationotherthaninpersonarealsoincluded.
=================================================================================
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E-commerceingeneralisgrowingrapidlythroughoutIndiainspiteofproblemssuchasthelowlevelsof
personalcomputersandinternetuseandpoortelecommunicationsinfrastructure.
According to the United Nations' agency, the International Telecommunication Union (ITU), just over
51.7millionpeoplewereestimatedtobeinternetusersinIndiaduring2008andtherewereover5.2million
broadbandsubscribers.Thenumberofinternetusershasgrownsubstantiallyfromjustover1.4millionin
1998.
Certain online services are becoming especially popular. These include matrimonial matchmaking, job
seeking,auctions,sharetradingandbanking.Thedemandforinsuranceservicesgrowsatalesserpace.
Indeedsomeobserversdescribeonlineinsuranceactivityasaninsignificantproportionofthetotal.
Examplesoftwocompaniesthatsellinsuranceonlinearethetwolargestprivatecompanies,namelyICICI
LombardGeneralInsuranceandBajajAllianzGeneralInsuranceCo.
ICICI Lombard, for example, provides an online service for the issue of policies for travel, health, motor,
homeandpersonalaccident.Theirwebsiteexplainsthatdigitallysignedpoliciesareavailable24hoursa
day,sevendaysaweek.Customerscantakeaprintstraightaway.Hardcopiesarecourieredthesame
day(orthenextdayifthecustomerbuysafter6.0pm)andshouldreachthecustomerwithintwotothree
workingdays.
SomebrokersprovideonlinecomparisonwebsitessuchasPolicyBazaar.
In May 2008, Optima Insurance Brokers launched click2insure, an online service that provides
"comparison"informationaboutautomobile,home,travel,healthandlifeaswellastheoptiontopurchase
theproductsonline.
TheIRDAanticipatedinsurers'involvementinonlinebusinessbypermittingpremiumpaymentsonlineand
e-transfer amongst other things, in accordance with the provisions of the Insurance Regulatory and
Development Authority (Manner of Receipt of Premium) Regulations 2002.
The Information Technology Act 2000 legislates on the use of electronic signatures. Additional security
measureswereintroducedbytheInformation technology (Amendment) Act 2008passedinDecemberof
thatyear.
Other Direct Marketing
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=================================================================================
Update August 2011

Guidelinesof14May2007whichmadeanexceptiontotherulethatonlylicensedagentsorother
intermediariescan"solicitorprocure"insurancebusinessandhencepermittedpromotionalactivitiestobe
carriedoutviacoldcallingby"otherlicensedintermediaries".
TheIRDA Guidelines on Distance Marketing of Insurance Productsapplytodistancemarketingcarriedout
byinsurersandintermediariesatthevariousstagesoftheoffer,negotiationandconclusionofsale
processes.Thedefinitionof"distancemarketing"includeseveryaspectofsolicitation(includinglead
generation)andsaleofinsuranceproductsthroughvoicewhichincludestelephonecalling,shortmessage
services(textmessaging)andelectronicmodeswhichencompassese-mail,internetandinteractive
television.Physicalmodes,includingdirectpostandnewspaperandmagazineinsertsandsolicitation
throughanymeansofcommunicationotherthaninpersonarealsoincluded.
=================================================================================
Thedistributionofmotor,homeowners',personalaccidentandotherpersonallinesinsurancebytelesales
has become widespread. Insurers are particularly active at renewal times. When this report was in
preparation,however,nostatisticswereavailabletoindicatejusthowthebusinesswasdeveloping.Other
direct marketing includes sales by direct mailing, something that has been carried out sporadically.
Enthusiasm for these types of sales should be tempered by the fact that Indian consumers show a
preferenceforface-to-facesales.Mindfulofthisproblem,themarketofferswould-beclientsgiftvouchers
asanincentivetobuy.
Press reports in May 2010, suggested that the Insurance Regulatory and Development Authority (IRDA)
willsoonpublishregulationstoprotecttheinterestofinsuranceclientswhousetelesalestobuycover.
Insurers,boththewell-establishedstate-ownedinsurersandthenewerprivatecompaniesusealltypesof
advertising media to promote both their brand names and their products. The new companies are
particularly concerned with promoting their names. For most insurance consumers and potential
consumersthefactthatthenewcomershavemultinationalinsurersaspartnersmeanslittleasinIndiathe
likesofRSA(RoyalSunAlliance)andAIG/Chartis,forexample,areunknownquantitiesinspiteofthefact
thatinmanyotherpartsoftheworldtheymaybehouseholdnames.
Television commercials remain the most popular form of advertising amongst insurers, especially life
offices.
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Bancassurance
Inordertoparticipateinbancassuranceactivities,anumberofbankshaveregisteredascorporateagents.
This means that they may distribute insurance products for an insurer through their extensive branch
networksinreturnforthepaymentofcommission.Asagentsthebanksarerestrictedtocollaborationwith
just one life and one non-life insurer at a time. When this report was in preparation bancassurance was
describedas"agrowingbusiness"withmostactivityinmotorandlife.
Itisnotknownwhichbankshavedefinitelyobtainedpermissiontooperateasnon-lifeagentsbuttheyare
likely to include some of the banks that were reported to have entered bancassurance/ ownership
partnershipsinrecentyears.Theseincludethefollowing:
Insurer
Bank
BajajAllianz
ICICILombard
RoyalSundaramAlliance
StandardChartered,J&KBank
ICICIBank(joint
venture),DevelopmentCreditBank
Citibank,AmericanExpress,Standard
CharteredandABN/AMRO
TATAAIGGeneralInsurance
HSBC,IDBI
HDFCERGO
HDFCBank,AxisBank
Theroleofbanksinthedistributionofinsurancebusinesswillgrowinimportance,duetotheirextensive
branchnetworks(estimated60,000branches)thatgivetheinsurersaccesstoalargeclientbase.Thisis
particularly important in the rural areas, as the licence conditions require insurers to meet sales targets
imposed by IRDA for business sold in these areas. Industry sources estimated that bancassurance
generatesatleast35%ofnon-lifeinsurers'premiums.
Thissatisfactorygrowthdoesnotmeanthatthebancassurancesectoriswithoutitsproblems.Akeyfactor
whichpreventsthesectorfromachievingitsfullpotentialisthepoorqualityofbankcustomerdataandthe
absenceofstraightforwardcustomerrelationsmanagement,toolsthatareindispensableforthesuccessful
launch of cross-sale insurance products. State-owned banks, which control more than 90% of total bank
customers,aresaidtobeparticularlyweakinthisarea.
TheinsurancepressreportedinFebruary2005thattheReserveBankofIndiahadannouncedthatprimary
urban co-operative banks (UCBs) having a minimum net worth of INR 500mn (USD 11.33mn) can now
undertakeinsuranceagencybusiness.EarlierthiskindofbusinesswasconfinedtoUCBswithaminimum
net worth of INR 1bn (USD 22.65mn). In May 2008 it was reported that irrespective of their net worth,
UCBsmightnowactascorporateagentsforinsurancecompanies,butwithoutriskparticipation.
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All primary UCBs may also undertake insurance business on a referral basis through their network of
branches.Underthereferralsystemtheinsurerhasnophysicalpresenceinthebank,UCBorothers,such
as a counter or offices to sell their products to the bank's customers. Where the insurer is physically
present the bank must ensure that adequate disclosure and transparency measures are adhered to in
relationtothesellingofinsuranceproductsonitspremises.Withthereferralarrangement,banksearnfees
on the basis of the business "referred" to the insurers through the provision of product information to
customers;however,banksmustensurethatthecustomersareinapositiontochoosefreelybetweenthe
productsofanumberofinsuranceoffices.
Wheretheinsurerhasaphysicalpresenceinabankbranch,thebank,besidescomplyingwithanumberof
IRDAregulations,shouldalsoenterintoaformalagreementwiththeinsurancecompanyconcernedasto
the use that the company will make of the bank premises. The agreement should be for a period not
exceedingthreeyearsinthefirstinstanceandthebankshouldhavethediscretiontorenegotiatetheterms
withtheexistinginsurerdependinguponitssatisfactionwiththeserviceorreplaceitwithanothercontract
aftertheinitialperiodhasexpired.
Theregulatorhassetupacommittee(asperanIRDAorderdated4May2009)toexaminethequestionof
thedesirabilityofallowingbanks,asinsuranceintermediaries,toworkwithmorethanoneinsureratatime.
The committee has been asked to submit a report within two months but no further news had been
receivedwhenthisreportwasinpreparation.
Agencies
=================================================================================
Update November 2010
Itisevidentthattheregulator,theInsuranceRegulatoryandDevelopmentAuthority(IRDA),ispaying
specialattentiontointermediarycompliance.Inadditiontoitsrigorousreviewofbrokerlicencerenewalsin
mid-2010,itwasreportedinAugustthattheregulatorwastakingactionagainstalargenumberof
corporateagentsforfailuretofilepermanentaccountnumbers(PAN)detailswithitsoffice.PANsareused
asanidentificationmeasurebytheIndiantaxauthoritiesandaredesignedtocutdownontaxevasion.In
July,theIRDAgaveinsurersaroundthreeweekstoupdatethetaxdetailsandPANrecordsofthe
corporateagentsthattheyworkwith.Bythemonth-enddeadline,however,884lifeandnon-lifeagentshad
failedtoregistertheirupdateddetails.Asaconsequence,theIRDAurgedinsurerstoavoidusing
non-compliantcorporateagents,whoselicenceswouldbeunderreview.
=================================================================================
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Non-lifeagentshaveworkedwithincertainrestrictionsforaverylongtime.Forexample,untilApril2001,
there was a market rule that no commission could be paid to an intermediary in cases where non-life
businessemanatedfromaclientwhosepaid-upcapitalwasINR1mn(USD21,186in2001)ormore.Thus
mostbusinesswasplacedwithinsurersonadirectbasis.EvenwhentheyhadbeenfreedoftheINR1mn
restriction, agents still had to contend with the limitation that they could not compete for business
emanatingfromthepublicsectorsources.
Thisrestrictionhasnowbeenliftedbutthelong-sufferingagenthadtolivewiththeprobabilitythatalarge
clientwouldprefertoearna5%discountforplacinginsurancedirectwithinsurers.Inthisrespecttheagent
wasatthesamedisadvantageasthebroker.Withtheabolitionofallremainingtariffson1January2007,
the discount regulations became redundant, which means that agents and brokers can now compete for
corporatebusinessonequaltermswithotherdistributionchannels.
In view of these past restrictions, the agent's market share as a channel of distribution in the non-life
marketsectorislikelytobesmallalthoughtherearenostatisticstosupportthisassertion.
The IRDA reported that at the end of March 2006, the latest information for non-life agents, there were
721,696 licensed agents of which 721,480 were individuals and 216 were corporate. A number of banks
andevenlocalauthoritieshavereceivedlicencestooperateascorporateagents.Theregistrationofbanks
hasfacilitatedtheintroductionofbancassuranceinIndia.
AgentshavetoconformtothelicensingrulesprescribedbytheLicensing of Insurance Agents Regulations

2000, and the Licensing of Insurance Agents Regulations (Amendment) 2002. These apply to both
individualandcorporateagents.Inpractice,theinsurerappliestotheIRDAforalicenceonbehalfofthe
agentwhohasnodirectlinkwiththeregulator.
TheIRDAhasspecifiedtheminimumeducationalqualificationsforallapplicants,onesetforthoseworking
in urban areas and another in the countryside, together with the practical training and examination
standards. The responsibility for this training and examination has been delegated to the registered
insurersandeachinsurermusthaveanominatedofficertoberesponsibleforthis.Thesenomineesmust
participate in the practical training and pass the pre-recruitment examination as part of their licence
requirements.
Theagents'licensingexaminationsareconductedbytheInsuranceInstituteofIndia,whichisinMumbai,
and the National Stock Exchange. The latter has been given permission to conduct the examinations
on-line.Inaddition,theIRDAhassofarapprovedover500traininginstitutesaroundthecountrytogivethe
practicaltrainingforagents,andsomeoftheseinstitutesaremanagedandrunbytheinsurersthemselves.
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Agentsareallowedtoselltheproductsofonlyoneinsurer,andmustapplyforseparatelicencestoselllife
andnon-lifebusiness.Itistheresponsibilityoftheinsurerstoensuretheagentshavepaidthecorrectfees
to IRDA, and have the qualifications laid down in the regulations, including the passing of the licensing
examinationsinlifeornon-life.
Noinsuranceagentispermittedtobecomeorremainadirectorofanyinsurancecompanyor,inthecase
of corporate agents, have a portfolio of insurance business under which the premium from any one
organisationoronegroupoforganisationsisinexcessof50%oftotalpremiumwritteninanyyear.
In order to improve the services offered by insurance agents, the IRDA, by virtue of the provisions of
Circular Ref 31/IRDA/CA/CIR/Sep-09dated2September2009isrequiringagentstostaywithaninsurer
for at least three years. The regulator has also said that renewal commissions should not be paid if an
agent leaves the company within five years of joining it. An agent now needs to obtain a "no objection"
certificatefromhisorherexistinginsurancecompanybeforeheorshecanmovetoanothercompany.
The government-appointed Swarup Committee on Investor Awareness and Protection made a formal
recommendationinDecember2009thatthecommissionstructurebeeliminatedfromthefinancialsystem
witheffectfromApril2011.Itisproposedthatfinancialintermediariesincludinginsuranceagents,bothlife
and non-life, should be paid a fee that is negotiated with the consumer. Since then, the regulator, IRDA,
haswrittentotheMinistryofFinanceobjectingtotheproposals.
Insurance Brokers
Sincethefirstlicenceswereissuedinearly2003,brokershavemadesteadyprogressinincreasingtheir
market share, particularly in so far as corporate business is concerned. It is estimated that from 15% to
20%ofthemarket'sgrossnon-lifeincomeissecuredthroughbrokers.Alltheleadingmultinationalbrokers
operate in the Indian market in joint venture companies. The broker sector competes for business in the
corporatesectorwithdirectconnections.
Duringthepasttwoyearsorso,however,theintensecompetitionbetweeninsurerssincetheabolitionof
tariffs has sent premium rates in a downward spiral resulting in a fall in revenue and reduction in
correspondingcommissionincomeforallintermediaries,bothbrokersandagents.Thisisatatimewhen
someadditionalincomecanbeexpectedfromthefactthat,toanincreasingextent,largerdirectclientsare
transferring their business to brokers because of claims-handling problems. These, according to market
sources,arisealltoooftenwhendealingdirectwithaninsurer.
TheIRDAregulatesbrokerswhicharegovernedbytheprovisionsoftheInsurance (Amendment) Act 2002
and its related regulations, the Insurance Regulatory and Development Authority (Insurance Brokers)
Regulations 2002whichsetoutthelicensingrequirements,includingcapitalandeducationalrequirements.
Brokerscanbelicensedasfollows:
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directbroker-dealingwithlifeornon-lifebusiness,orboth
compositebroker-dealswithdirectlife,non-lifebusiness,orboth,andreinsurancebusiness
reinsurancebroker-dealswithreinsurancebusinessonly.
Itisestimatedthataround15%to20%ofthemarket'sgrossnon-lifepremiumincomeissecuredthrough
brokers.
In addition to the prescribed educational qualifications, the principal officer of a broking operation must
havehadatleast100hourspracticalandtheoreticaltrainingfromaninstitutionrecognisedbyIRDA.The
capitalrequirementsareasfollows:
Category of broker
Minimum capital requirement (INR

mn)
Directbroker
Reinsurancebroker
20
Compositebroker
25
InSeptember2006theinsurancepressreportedthatdirectandcompositebrokerswerelobbyingtheIRDA
fortheminimumcapitalrequirementtobereducedtoINR2.50mn(USD56,625)andINR12.50mn(USD
283,126). A committee under the chairmanship of G K Raman, chairman of Royal Sundaram Alliance
InsuranceCompany,hasbeensetuptolookintothematterandthatoflegalisingco-brokingandbrokers'
sub-agents,whicharenotallowedinIndiaatpresent.NodecisionhadbeenmadeaboutthematterbyMay
2010 when Axco last made enquiries in the market. It is said that the smaller brokers support proposed
reductions for obvious reasons whilst other market practitioners would, in fact, like to see an increase in
capitaltogiveincreasedfinancialstrengthtothebrokersector.
IRDA regulations introduced recently include measures such as the Insurance Regulatory and
Development Authority (Insurance Brokers) (Amendment) Regulations 2007 which introduces (1) an
amendedtableoffeespayablebybrokersuponapplyingforanoperatinglicenceand(2)annuallicence
fees.
For example, at the initial registration a direct broker now pays a fee of INR 20,000 (USD 453) and, at
renewal, a sum calculated at the rate of 0.50% of remuneration earned in the preceding financial year
subjecttoaminimumofINR25,000(USD566)andamaximumofINR100,000(USD2,265).Licencesare
renewableeverythreeyears.Thereareotherratesoffeesforothercategoriesofbroker.
Thelimitonforeignequityholdingsis26%,inasimilarfashiontotheinvestmentlimitinaprivateinsurance
company.
Brokersareobligedtoarrangeprofessionalindemnityinsuranceforanyoneclaimandintheaggregatefor
theyear,asfollows:
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Category of broker
Level of professional indemnity

cover
Directbroker
3timesremunerationreceivedatthe
endofeveryfinancialyearsubjecttoa
minimumlimitofINR5mn
Reinsurancebroker
Compositebroker
TheIRDA's"statusofinsurancebrokers"listof30June2010containsthenamesof302brokersofwhich
24hadlosttheirlicencesinthecurrentthree-yearrenewalprocessand64weredescribedashavingthe
"renewal application under scrutiny" or as "regulatory action is under process". Of the remaining 214
brokerswithlicences,sixarespecialistreinsurancebrokersand208retailbrokers.Somebrokersarejoint
ventureswithforeigncompanieswhoseshareholdingsarelimitedto26%.AmongsttheseareWillisIndia
Insurance Brokers whose licence renewal has been declined as documented by the IRDA's Order
IRDA/BRK/ORD/LC/147/09/2010 of 3 September 2010. The company has appealed. In addition, Aon
GlobalInsuranceBrokers'licenceisunderscrutiny.
Someofthebrokersthathavelosttheirlicencesduringthecurrentrenewalprocessorwhoserenewalis
still being considered for one reason or another are likely to be brokers who simply cannot afford the
renewalfeeorwhomtheIRDAjudgestobetoosmalltobeviable.
Besides Willis and Aon, other foreign brokers such as Marsh (USA), HSBC (United Kingdom), Tower
Insurance(NewZealand)andHowden(UnitedKingdom)havejointventureoperationsinIndiawithlocal
interests.ItislikelythatthedomesticbrokerJBBoda&Coisthelargestcompanyduetoitsworkasa
reinsurancebrokerandconsultantpriortotheauthorisationofconventionalbrokersin2002.
Brokersarenotpermittedtoholdbindingauthoritiesorissuemotorormarinecargocertificatesonline.As
faraspremiumsareconcerned,reinsurancebrokersmustplacetheminatrustfundwhilstthoseforretail
businessarepaiddirectlytotheinsurerbythepolicyholder.
ItismandatoryforbrokerstobelongtotheInsuranceBrokersAssociationofIndiaofwhichBharatBodais
thechairman.
Whenthisreportwasinpreparationtherewasnoinformationabouttherevenuesofthetop10brokers.
Intermediaries' Commissions
In its circular dated 25 October 2008, the IRDA directed that with effect from 1 October 2008 "the
percentageofpremiumthatcanbepaidbywayofcommissionorbrokerageonageneralinsurancepolicy
shallnotexceedthepercentagesofpremiumssetoutbelow.Nobrokeragecanbepaidinrespectofan
insurance where agency commission is payable and likewise, no agency commission can be paid in
respectofaninsurancewherebrokerageispayable."
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Class of Insurance
Maximum percentage of final premium excluding service tax

Agents' commission (%)
Brokerage (%)
General
10.00
12.50
Riskstreatedaslargerisksunder
para19(v)ofFile&Use
Guidelines
5.00
6.25
2)Motorinsurance(ODportion),
WC/ELandstatutorypublicliability
insurance
10.00
10.00
1)Fire,IARandengineering
3)Motorthirdpartyinsurance
Nil
Nil
4)Marinehullinsurance
10.00
12.50
5)Marinecargoinsurance
15.00
17.50
6)Allotherbusiness
15.00
17.50
Brokersectorsourcesreportthatsomeinsurersarerefusingtopaymorethan7%to10%forhealthcare
(under"allotherbusinessabove")becauseofitsunprofitability.
According to the IRDA circular "no payment of any kind, including administration or servicing charges is
permitted to be paid to the agent or the broker in respect of which he is paid agency commission or
brokerage".
Paragraph 19(v)oftheGeneral Insurance File & Use Guidelinesof28September2006readsasfollows:
"Forthepurposesoftheseguidelines,largerisksare;
insurancesfortotalsumsinsuredofINR2,500croresorINR25bn(USD566mn)ormoreatonelocation
forpropertyinsurance,materialdamageandbusinessinterruptioncombined
INR100croresorINR1bn(USD22.65mn)ormorepereventforliabilityinsurance".
Consumer Protection
In accordance with the provisions of the Insurance Regulatory and Development Authority (Insurance
Brokers) Regulations 2002, every broker shall follow recognised standards of professional conduct and
dischargehisorherfunctionsintheinterestofthepolicyholders.Acodeofconductdetailsthestandards
that are expected of brokers. The code refers to conduct in matters relating to clients' relationship, sales
practices,thefurnishingofinformationandexplanationsofinsurancecontractsamongstothers.
Company Changes
Asfarasisknownnonewlargebrokersenteredthemarketin2009or2010.
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Multinationals
Local Multinationals
Indian companies are increasingly buying up companies abroad as strategic acquisition, indicating the
growingcompetitivenessoftheIndiancorporatesector.Thewidegeographicalspreadoftheirinvestments
especially in the service sector has often been prompted by the presence of sizable communities of
non-resident Indians (NRI). The service companies include banks, insurance companies and hoteliers.
Indiancompaniesfromtheenergysectoralsohaveoverseasinterests.In2007,inwhatwasdescribedas
thelargestacquisitionevercarriedoutbyanIndianfirm,TATASteelboughttheAnglo-Dutchsteelmaker,
Corus,forUSD11.30bn.
Estimated data from the Indian Brand Equity Foundation (Ministry of Commerce and Industry) suggests
thatforeignacquisitionbyIndiancompaniestoppedUSD95bnin2008-09.
Most of India's non-life private insurers have foreign shareholders that can provide varying degrees of
service to those of their local clients in India that have a network of operations outside the country.
ConverselymultinationalclientsoftheminorityshareholdersfromoutsideIndiawithlocalsubsidiariescan
expect their insurances to be looked after by the joint venture insurers in India. For example, it is known
thatRoyalSundaramhastakenontheinsurancesofseverallocalsubsidiariesofRSA(formerlyRoyal&
SunAllianceGroup)internationalinsureds.Itishighlylikelythatothersofthejointventureinsurerswillhave
pickedupclientsinIndiainsimilarsituations.Itshouldbenoted,however,thatthereinsuranceregulations
prohibitthistypeofbusinessfrombeinghandledonafrontingbasis.
BeforethejointventureprivateinsurersenteredtheIndianmarketattheendof2000,thefourpublicsector
insurers may have had international partnership arrangements to enable them to handle the business of
the Indian subsidiaries of multinational enterprises. The public insurers may still have some such
agreementsinspiteofthepresenceofprivateinsurerswithinternationallinks.
AtleastoneoftheIndianpublicsectorinsurers,theNewIndia,canserveitsclientsfromitsownoverseas
offices. India's leading non-life company has associate or subsidiary companies in Sierra Leone, Ghana,
Nigeria, Liberia, Trinidad & Tobago and Barbados as well as direct operations in Toronto, London, the
MiddleandFarEastandAustralasia.
Foreign currency policies issued by an admitted insurer to non-residents to insure risks outside India
requirepriorapprovalfromtheReserveBankofIndia(RBI)andwillbesubjecttothelawsofthejurisdiction
in which the risk is situated. Remittance of claims payments in a foreign currency is only permitted if the
policywasissuedwithpriorapprovaloftheRBI.
Foreign Multinationals
InIndiaitisnotpossibletomake100%frontingarrangements.ThisresultsfromtheprovisionsofChapter
II of the Reinsurance Regulations 2000, which define the procedures to be followed for reinsurance
arrangementsforinsurersintheIndianmarketandbeginwiththereminderthatthearrangementshaveto
beguidedbytheneedtoachievemaximumretentionwithinthecountry.
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and volume of business. The Insurance Regulatory and Development Authority (IRDA) is empowered to
require an insurer to justify its retention policy so as to ensure that it is not merely fronting for a foreign
insurer.
Allinsurersbothpublicandprivatesectorareobligedtomake10%cessionsforallclassesofbusinessto
thestate-ownedprofessionalreinsurer,theGeneralInsuranceCorporation(GICRe).The10%cessionis
down from 15% in 2007-08 and 20% in prior years. Subsequent to the obligatory cessions, insurers are
requiredtoofferGICandinsurerswithintheIndianmarketashareintheirfacultativeandtreatysurpluses
beforetheplacementofsuchcessionsoutsidethecountry.
Captives
Summary and Trends
Offshore captive operations are not a feature of the Indian insurance market and as far as is known the
government has no plans to introduce legislation or create tax environments that encourage their
establishment.
Local Legislation
Thereisnorelevantlegislationandasfarasisknownnoneisplanned.
Locally Domiciled Captives

Therearenolocallydomiciledcaptives.
Local Captive Owners

Whenthisreportwasinpreparationnoinformationwasavailable.
A.R.T. & Risk Management

Summary and Trends
Duringthefinancialyear2007-08,theGeneralInsuranceCorporation(GICRe)enteredintoanalternative
risktransfer(ART)agreementwithSwissReinAmericatoprovidethefollowing:
topendumbrellaprotectionfordomesticbusinessand
takingexposurefromnetretainedsharesonotherprotections.
The two contracts were combined and renewed for a three-year period from 1 May 2007 with improved
terms for a cover of INR 200 crores or INR 2bn (USD 45.30mn) for domestic and USD 20mn for foreign
business.AccordingtoGICRe,"Thisarrangementprovidesacost-effectivecomplementtothetraditional
excessoflossprotectionandwouldresultinsignificantbenefittotheCorporationwhenrealizedattheend
ofthecontractperiodanditwillbeaccountedattheendofthecontractperiod."
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An increasing number of insurance clients are taking risk management seriously. Indeed a leading joint
venturebrokerconfirmedinMay2010thatthequalityofriskmanagementhasimprovedsignificantlysince
enquirieswerelastmadeinthemarketin2008.EducationinitstechniquesisinthehandsoftheIndian
Institute of Insurance and Risk Management based in Mumbai. In addition to the insurers' own
arrangements,theinstituteorganisesregularseminars.
Whilst large industrial companies employ fully fledged risk managers, most limit themselves to having
safety officers. Indeed all plants with 1,000 or more workers have a statutory obligation to employ such
officers.Earlyretirementprogrammesinthepublicsectorinsurersarereleasingwell-qualifiedseniorstaff
intothemarketandsomeoftheseareknowntohavejoinedindustrialandotherfirmsasriskmanagers.
Thisisawelcomedevelopmentthatmustbeofbenefittotheinsurancesectorasawhole.
Inaddition,thearrivalofprivateinsurancecompanies,mostwithmultinationalinsurershareholderpartners,
isprovidingastimulustothegrowthofawarenessofthebenefitsofriskmanagement.Themultinationals
are applying their ample experience from other insurance markets, including North America, Europe and
Japan. Retail brokers have operated in the market since the beginning of 2003, also adding to market
awareness.
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Insurance Policies
Supervision
The Tariff Advisory Committee (TAC), a statutory body set up in accordance with the provisions of the
Insurance Act 1938 forms part of the Insurance Regulatory and Development Authority (IRDA) whose
chairman also acts as the committee's chairman. Until 1 January 2007 the TAC, in its own words,
"controlled and regulated the rates, terms and conditions that could be offered by insurers in respect of
generalbusiness".
On1January2007,however,thepremiumratesapplicabletofire,engineering,motor(exceptthirdparty
only cover), workers' compensation and other classes of business previously set under tariffs were
withdrawn.TheTACstillsetoutthetermsofpolicywordings,liabilitylimits,clauses,extensions,warranties
andsoonwhichweretobeuseduntil31March2008.
The IRDA issued Guidelines on File and Use Requirements for insurers' own wordings etc on 28
September 2006. Amongst other things the guidelines stated that "insurers may file their proposals for
changesincover,terms,wordingsetcforsuchproductsfromadatetobenotifiedbytheauthority(IRDA),
buttobegiveneffecttoafter31March2008".
The IRDA then changed its mind about policy wordings being "detariffed", which had been due to take
placeon31March2008.InitsGuideline No 066/IRDA/F&Udated26March2008,theregulatorannounced
that "pending examination of common market wordings proposed by the General Insurance Council,
insurers shall continue to use the coverage, terms and conditions, wordings, warranties, clauses and
endorsementsoftheerstwhiletariffclassesofinsurancecoversuntilfurtherorders".
Initscircular019/IRDA/NL/F&U/Oct 08,however,theIRDAadvisedmarketplayersthatithaddecided,ina
number of specified cases, to relax the terms and conditions of cover of the erstwhile tariff classes of
businessinfire,engineering,IARandmotor,witheffectfrom1January2009.
Whenfilingrevisions,insurerswillalsofileprojectionsofthevolumesandanticipatedprofitmarginstobe
generatedfromtherevisedproducts.
Itshouldbestressedthatonlyinsurancecompaniescanfilenewwordings.Brokers,forexample,arenot
permittedtodoso.
Policy Wordings
Policies are usually written in both Hindi and English, and sometimes in other Indian languages such as
Tamil. In the event of a dispute, the English text prevails. Foreign market or broker manuscript wordings
areacceptableaslongastheyaresubmittedtotheTAConafileandusebasis.
Commonpolicyexclusionscoverdestructionordamagecausedbywarandrelatedhazards,contamination
byradioactivesubstances,etc.
Additionalcommentonwordingsistobefoundintheprecedingsection.
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Insurance Policies
Local Insurance Law
FundamentalEnglishlegalprinciplesarefollowedwithregardtoissuessuchasnon-disclosure,innocent
misrepresentation, subrogation, arbitration provisions etc. Policies contain jurisdiction clauses that are
limitedtoIndia.
As far as is known, local law does not require the insurer to provide additional limits for legal costs in
additiontotheusuallimitsofindemnity.
Policy Issue
Itisunderstoodthatthereisnoruleaboutpolicieshavingtobeissuedwithinacertaintimeframe.
Theinsureddoesnothavetosignpolicies.
Policy Currency
NormallypoliciesareissuedinIndianrupees(INR)butlimitsarepermittedinforeigncurrenciesforcertain
classes of business, eg CAR, marine cargo exports and product liability, all with the permission of the
ReserveBankofIndia.
CAR limits in foreign currency may be approved by the bank if the project relies on the importation of
machinery and equipment from abroad. If such machinery and/or equipment is lost or damaged, the
principalorthecontractorwilllookforindemnityinforeigncurrency.
Foreigncurrencylimitsareincludedinmarinecargoexportpoliciessothattheycanrespondtoanychange
ofinterestneedsoncetheinsuredmerchandiseisoutsideIndia.
Concerningproductliabilitypolicies,foreigncurrencylimitsareincludedinordertosatisfytheimportersof
IndiangoodstotheUS.
Premium Payment and Terms

TheInsurance Regulatory and Development Authority (Manner of Receipt of Premium) Regulations 2002
set out permitted methods of payment of premium, in addition to cash, without changing the basic
requirementthatthepremiumshouldbepaidbeforetheinsurergoesonrisk.Premiumpaymentscannow
bemadeviacreditcards,theinternet,e-transfer,directdebitandbanker'sdraft.Thismeansthatinsurers
arenowabletodevelopane-commercestrategy.Allpremiumsarepaiddirectlytotheinsurer,notthrough
anintermediary.
InaccordancewiththeAnti Money Laundering GuidelinespublishedbytheIRDAwhichcameintoeffecton
1August2006,insurersmaynotacceptapremiumofmorethanINR50,000(USD1,133)incash.
PremiumsmaybecollectedinforeigncurrenciesincludingUSD.
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Insurance Policies
Cancellation and Renewal
Renewalofpoliciesisnotautomaticbutisinvitedbytheinsurer.Shouldaninsuredrequestcancellation,
theinsurerpermitsashort-termrateofreturnpremiumsubjecttotheretentionofaminimumpremium.If
theinsurerrequestscancellation,15days'noticeinwritingneedstobegiven.Apro-ratareturnismadein
suchcases.
Types of Policy
Packageandallrisktypepoliciesarenowcommon.Therearepackagepoliciesforshops,offices,hotels,
educationalinstitutionsandothers.Homeowners'policiesareavailable.
Industrial units (excluding petrochemical risks) having sums insured of INR 100 crores or INR1bn (USD
22.65mn) and above in one or more locations in India are eligible for cover under an Industrial All Risks
policy.
"Forthepurposesoftheseguidelines,largerisksare:
insurancesfortotalsumsinsuredofINR2,500croresorINR25bn(USD566mn)ormoreatonelocation
forpropertyinsurance,materialdamageandbusinessinterruptioncombined
In the words of the Guidelines, " These are typically insurances that are designed for individual large
clients, and where the rates, terms and conditions of cover may be determined by reference to the
international markets." The ways and means of making such reference are clearly explained in the
Guidelines. A petrochemical plant, for example, which is excluded from IAR coverage, is more likely to
qualifyfor"largerisk"treatment.
Average
Theaverageclauseofthestandardfireandspecialperilspolicyreadsassetoutbelow.
"Property hereby insured shall at the breaking out of any fire or at the commencement of any loss of or
damagetothepropertybyanyperilherebyinsuredagainstbecollectivelyofgreatervaluethanthesum
insuredthereon,thentheinsuredshallbeconsideredasbeinghisowninsurerforthedifferenceandshall
bear a rateable proportion of the loss accordingly. Every item, if more than one, of the property shall be
separatelysubjecttothiscondition."
Inflation
Inordertochecktheadverseeffectofinflationonsumsinsured,propertyandengineeringpoliciescarry
escalationclauses.
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Natural Hazards
Earthquake and Other Geological Hazards
Exposure
MostofIndiaisregardedasalowtomedium-riskareaalthoughtheboundarybetweentheGangeticPlains
andtheHimalayanrangesisazoneofcontinuallyviolentearthmovement,withearthquakescommonfrom
thewesternborderlandsofPakistan,throughNepaltoAssam.AfurtherareainthewestaroundBhujinthe
Great Rann of Kutch is also regarded as a high-risk zone. This assessment was fully justified when an
earthquakehitGujaraton26January2001killingaround35,000peopleandresultinginpropertydamage
amounting to an estimated INR 8.00bn (USD 174mn in 2001). During the past 30 years, earthquakes
registeringinexcessof6.0ontheRichterscalehaveoccurredonaverageeveryfiveyears.Thereareno
volcanorisks.
Tsunami or giant tidal waves can result from cyclones in the Bay of Bengal, but the one that hit the
south-east coast at the end of 2004 was prompted by an underwater earthquake far out in the Indian
Ocean.
The earthquake registered 9.0 on the Richter scale, later upgraded to 9.3, and occurred off the western
coastofthenorthernhalfoftheIndonesianislandofSumatraintheearlymorningof26December2004.It
wasthemostpowerfulearthquakeeventsincethequakewhichstruckAlaskain1964,whichmeasured9.2
ontheRichterscale.TheearthquakethatcausedsomuchdamageinPakistaniKashmirinOctober2005
registered7.6.
TheseismicmovementsoffSumatratriggeredaseriesoftsunamisthatcausedwhathasbeendescribed
astheworstnaturaldisasterinmoderntimes.Wavesofupto15metres(about50feet)inheighttravelling
at a speed of more than 500 km per hour caused devastation along the coastlines of Bangladesh,
Malaysia,theMaldives,Mauritius,theSeychelles,Somalia,SriLanka,TanzaniaandThailand.Duetothe
distances involved, the tsunami took different time intervals ranging from 15 minutes to seven hours to
reachthecoastlinesofthevariouscountries.ThetsunamisreachedtheworstaffectedpartsofIndonesia
within minutes. The east coast of India was affected after about two hours. More than 270,000 people
perished in all the countries affected by the tsunamis. In India, a count conducted within 10 days of the
disasterputthedeathtollthereataround16,000.
Accumulations and PMLs

BothpublicandprivateinsurersmaintainaccumulationrecordsandthecomputerisedregistrationofPMLs.
OneleadingprivateinsurerusesanRMScomputermodel.ItshighestPMLisinthestateofGujarat.Itis
understood that the public companies' records are less comprehensive than those of their private
competitors.
TheGeneralInsuranceCorporation(GICRe)revealedinits2008-09 Annual Reportthatthe"RMSsolution
software for earthquake exposure analysis has been implemented. The process of finalising Nat Cat
modelsare(sic)alsounderway."
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Natural Hazards
Limits and Scope of Cover
Basicearthquakeinsurance,providedasanextensiontothefireandspecialperilspolicy,coversdamage
followingearthquakeandshock.Firefollowingearthquakecanbeadded.Sumsinsuredarethesameas
thoseforfire.
According to market sources, it is probable that most industrial/commercial property policies carry
earthquakecover.
Plans to establish an earthquake pool financed by compulsory cessions of premium from the non-life
marketandmanagedbyGICRestillhadnotbeencompletedbyMay2010whenenquirieswerelastmade.
Marketparticipantssuggestedthatadequatecoverfromthereinsurancemarketwasstillavailable.
Rating and Deductibles

In a circular dated 4 December 2006, the Tariff Advisory Committee of the Insurance Regulatory and
Development Authority (IRDA) announced that it had decided that the rates, terms, conditions and
regulations applicable to fire and other business including earthquake currently under tariffs would be
Earthquake,fireandshock,wasclassifiedasan"add-on"coverintheoldofficialfiretariff.Until1January
2007 the tariff rates were as follows and may have dropped by as much 80% since the tariff's abolition.
ThisfallmaybereflectedintheratesthatindividualinsurerswillhavefiledwiththeIRDA.Erstwhiletariff
rateshavebeenusedasaguideforcalculatingnon-tariffrates.
ZoneI
1.00
ZoneII
0.50
ZoneIII
0.20
ZoneIV
0.10
Erstwhile tariff deductibles were 5% of each and every claim subject to a minimum of INR 10,000 (USD
227).InitsCircular 019/IRDA/ NL /F&U/ Oct 08,however,theIRDAadvisedthatwitheffectfrom1January
2009 insurers are permitted to file variations in deductibles from those prescribed under the former fire,
engineering, IAR and motor own damage tariffs subject to written disclosures and acceptance by the
insuredpriortofinalisationoftheinsurancepolicy.
With effect from 1 April 2010, non-life insurers agreed to introduce a series of minimum deductibles
applicable to fire and engineering policies for both new and renewal business. The measures were
introducedbytheinsurersonavoluntarybasisandundertheauspicesoftheGeneralInsuranceCouncil,
inanattempttoimproveunderwritingresults.
Examplesoftheproposednewdeductiblesforstandardfireandspecialperilspoliciesareasfollows:
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Natural Hazards
1.
PolicieshavingasuminsureduptoINR10crores(INR100mnorUSD2.27mn)perlocation-asperthe
TACtariff'sdeductible
2.
PolicieshavingasuminsuredaboveINR10croresperlocation
NonAOG(ActofGod)perils-5%ofclaimamountsubjecttoaminimumofINR10,000(USD227)
AOGperils-5%oftheclaimamountsubjecttoaminimumofINR25,000(USD566).
Thereareaseriesofotherdeductiblesforfirelossofprofits(businessinterruption)andindustrialallrisks
(IAR)policies.
Loss History
The following major earthquakes have been recorded since 1950 within the boundaries of post-partition
India.
Year
Location
Magnitude (Richter
scale)
Number of dead
Damage (USD mn)
2001
Gujarat
7.9
35,000
174
1999
Chomoli
6.8
100
Unknown
1997
Jabalput
6.0
38
37
1997
Alikadam
6.1
23
Unknown
1993
Latur/Khillari
6.4
9,475
280
1991
UttarPradesh
6.1
1,500
100
1988
Bihar
6.7
281
70
1967
Koyna
6.5
180
20
1950
Assam
8.7
1,526
Unknown
Itisestimatedthatthe1950earthquake,whichhaditsepicentreontheborderbetweenAssamandTibet,
wasamongstthe10mostviolentearthquakeseverrecorded.
TheLaturearthquakeofSeptember1993measured6.0to6.4ontheRichterscaleandhaditsepicentre
300 miles (483 km) south-east of Mumbai (Bombay). Within a few minutes, up to 50 villages were
destroyed,withthedeathtollputat9,475.
TheearthquakethathitGujaratoccurredon26January2001,the51stanniversaryofIndia'sbecominga
republic.Bhij,thedistrictheadquarterswithapopulationof150,000,wasflattened:itwasreportedthatnot
a single building in the town was left unscathed. A similar fate befell Bhachau, which had 35,000
inhabitants.InGandhidham,pressreportsestimatedthatnearly900buildingsofsixfloorsormorewereleft
unfitforhumanhabitation.Ahmedabad,oneofIndia'sforemostindustrialcentres,sufferedinasimilarway.
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Natural Hazards
Oneofthereasonsfortheearthquake'shighdeathrateisthatmanyresidentsofmulti-storiedapartment
blocksperishedwhenthebuildingscollapsed.Insomecasesbuildershavebeenarrestedonchargesof
non-compliancewithcodesfortheconstructionofearthquake-proofbuildings.
The Asian tsunami of 26 December 2004 hit the south-east coast of India, resulting in the deaths of
approximately16,000people.TheeastcoastofTamilNaduwasparticularlybadlyhit.Almost600villages
were affected. The small port of Nagapattinam was almost destroyed, and the district of the same name
suffered over 5,500 casualties. The worst hit areas were 30 islands in the Andaman and Nicobar group,
althoughthecasualtiestherewerelimitedbecauseofthesmallpopulations.Nevertheless,one-fifthofthe
population of the Nicobars is believed to have perished. Total insurance claims were estimated at USD
55.3mn.Insuredclientswerewarnedthattheywouldonlybecompensatedfortsunamidamageiftheyhad
purchasedbothearthquakeandSTFI(storm,tempest,flood,inundation)coveraspartoftheirfirepolicies.
Aspokesmanforoneleadinginsurernotedthatanumberofbusinesseshadoptedoutofearthquakeand
relatedperilstocutpremiumcostsatthelastrenewals.Eventhoughfloodingcausedthedamageinflicted
onthesouth-eastofIndia,insurersregardearthquakeasthecauseofthetsunamiitself.
The Indian insurance market was not very badly affected by the earthquake that hit Kashmir in October
2005. Most of the damage was on the Pakistani side of the border and in areas where there was little
insurance.
Utilities
InIndiamostcookingandheatingisbybutanegas.Therearenoundergrounddomesticgaspipes.There
areseveralnaturalgasandoilpipelines,however,someofwhichpassthroughthemoreactiveearthquake
zones.
Disaster Planning
In October 2005 the recently created central body, the National Disaster Management Authority (NDMA)
whosechairmanistheprimeminister,ManmohanSingh,waspreparingablueprintandpolicyfornational
disasterrelief.Therearealsoplansforthecreationofan8,000strongNationalDisasterResponseForce
recruited from various military and paramilitary forces within the country. The NDMA is considering the
formationofstate-leveldisastermanagementauthoritiesunderthechairmanshipofchiefministerswiththe
NDMAplayingacentralco-ordinatingrole.TherehadbeennodevelopmentsbyMay2010,whenenquiries
werelastmade.
ItisestimatedthatthecountryhaslostoverINR1.5lakhcroresorINR1.5trn(USD33.98bn)innatural
disasters over the past 18 years. Significant damage has been caused to life and property in the recent
pastwithmajorcalamitieslikethefloodsinMumbai(Bombay)andAndhraPradesh,theAsiantsunamiand
the Kashmiri earthquake. The NDMA is of the opinion that this could have been avoided through better
preparedness:responseafterthedisasterhasbeenwantinginmanyinstances.
Hitherto disaster relief has been a state-level responsibility without much support from the central
governmentandconsequentlyeffortstoprovideaidandcomforthavebeeninadequate,aweaknessthat
theNDMAisdesignedtorectify.
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Natural Hazards
CatNet(TM) Earthquake Map
Source: Swiss Re CatNetTM www.swissre.com

(c) Country map: GfK Macon AG
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Natural Hazards
Windstorm
Exposure
InIndia,cyclonesgenerallystriketheeastcoast;someoftheArabianSeacycloneshitthewestcoastof
the country as well as mainly the coasts of Gujarat and northern Maharashtra. Out of the storms that
developintheBayofBengal,over58%approachorcrosstheeastcoastinOctoberandNovember.India
hasaverylongcoastlineof3,814miles(6,138km),largepartsofwhicharevulnerabletocyclones.
Cyclones cause various degrees of damage, sometimes of disastrous proportions. For example, the
cyclonethatstruckOrissainOctober1999wasparticularlysevereandattractedworldwideattention.The
state-owned reinsurer the General Insurance Corporation (GIC Re) estimated losses at INR 4.4bn (USD
102mn).
AttheendofOctober2008,CycloneRashmicrossedintoBangladeshbutsparedadjacentWestBengalin
India

BothpublicandprivateinsurersmaintainaccumulationrecordsandthecomputerisedregistrationofPMLs.
It is understood that the public companies' records are less comprehensive than those of their private
competitors.

Windstorminsuranceisprovidedinastandardfireandspecialperilspolicy.Coverincludeslossasaresult
ofdestructionordamagedirectlycausedbystorm,cyclone,typhoon,tempestandtornado.

Inacirculardated4December2006,theTariffAdvisoryCommittee(TAC)announcedthatithaddecided
thattherates,terms,conditionsandregulationsapplicabletofireandotherbusinessincludingwindstorm
undertariffswouldbewithdrawnfrom1January2007.
Separatetariffratesforwindstormwerenotapplicable.Theratewasincludedinthatforstandardfireand
specialperils.Sincethetariffwithdrawal,itisunderstoodthatinsurershavekeptthewindstormratewithin
aglobalrateforfireandperils.
Thewindstormperilwassubjecttoatariffdeductibleof5%ofthelosssubjecttoaminimumofINR10,000
(USD 227). In its Circular 019/IRDA/NL/F&U/Oct 08, however, the IRDA advised that with effect from 1
January2009insurersarepermittedtofilevariationsindeductiblesfromthoseprescribedundererstwhile
fire,engineering,IARandmotorowndamagetariffssubjecttowrittendisclosuresandacceptancebythe
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Natural Hazards
1.
2.
Thereareaseriesofotherdeductiblesforfirelossofprofits(businessinterruption)andindustrialallrisks
(IAR)policies.
Loss History
Major windstorm/cyclone losses with related floods occur regularly in India. In recent years losses have
arisenfromthefollowingincidentsamongstothers:
May1999
A cyclone hit Gujarat State in West Bengal resulting in the destruction of an estimated
12,000 properties and the displacement of 50,000 people of whom 403 lost their lives.
MaterialdamagelosseswereassessedatUSD20mn.
October1999
Orissa suffered from an extremely severe cyclone, which attracted worldwide attention.
The state-owned reinsurer the General Insurance Corporation (GIC) estimated losses at
INR4.4bn(USD102mn).
August2000
Theheaviestrainsforwhatwasdescribedas40yearsresultedinseriousfloodingandat
least 90 people lost their lives in and around the city of Hyderabad. Much property was
destroyedordamagedbutnoestimateofthelosseswasavailable.
March2003
Gale force winds and hail uprooted trees and flattened hundreds of homes, killing an
estimated15peopleandinjuring200ineasternIndia.Thestormalsodestroyedcropsand
killedthousandsofcattleandpoultryonfarmsinwestBengal.
AttheendofOctober2008,CycloneRashmicrossedintoBangladeshbutsparedadjacentWestBengalin
India.
CatNet(TM) Windstorm Map
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Natural Hazards
Source: Swiss Re CatNetTM www.swissre.com

(c) Country map: GfK Macon AG
Flood
Exposure
Flooding often comes in the wake of cyclones, hence regions contiguous to the Bay of Bengal are
particularly susceptible to inundation. One of the most notorious floods of recent years occurred in May
1990,whencyclonicmudhitthestateofAndhraPradesh.Tidalwavescausedfloodingupto11miles(18
km)inland.Some1,000peopleperishedandseveredamagewascausedtocrops.
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Natural Hazards
OtherareaspronetofloodingincludethenorthcentralareaofthecountryaroundDelhiandothermajor
citiessuchasMumbai(Bombay)andKolkata(Calcutta),whichhavesufferedgreatlyovertheyears.
The devastating floods in and around Mumbai (Bombay) in July 2005, for which final insurance claims
paymentstotalledINR35bn(USD792.75mnatcurrentrates),werearesultofacombinationofhightides
andheavyrain.Thedestructionofmangrovesintheneighbourhoodofthecitymeansthathightideshave
greateraccesstodryland.ThehazardismadeevengreaterbecausethelocalMithiRiverissoclogged
withwasteinplacesthatitisunabletoabsorbtheamountoffloodandrainwaterthatitdidinthepast.

As in the case of earthquake and windstorm, both public and private insurers maintain accumulation
records and the computerised registration of PMLs. The public companies' records are said to be less
comprehensivethanthoseoftheirprivatecompetitors.
GICRereportsthatRMSsolutionsoftwareforearthquakeexposureanalysishasbeenimplementedbutno
newswasavailableatthetimethatthisreportwasinpreparationthatithadanythingsimilarforfloods.

Floodiscoveredwithinthestandardfireandspecialperilspolicy.
Insurerssurveyflood-proneareasasamatterofcourse.

Inacirculardated4December2006,theTariffAdvisoryCommittee(TAC)announcedthatithaddecided
thattherates,terms,conditionsandregulationsapplicabletofireandotherbusinesscurrentlyundertariffs
wouldbewithdrawnfrom1January2007.
Separate tariff rates for flood were not applicable. The rate was included in that for standard fire and
special perils. Since the tariff withdrawal, it is understood that insurers have kept the flood rate within a
globalrateforfireandperils.
Thefloodperilwassubjecttoatariffdeductibleof5%ofthelosssubjecttoaminimumofINR10,000(USD
227). In its Circular 019/IRDA/NL/F&U/Oct 08, however, the IRDA advised that from 1 January 2009
insurers would be permitted to file variations in deductibles from those prescribed under erstwhile fire,
engineering, IAR and motor own damage tariffs subject to written disclosures and acceptance by the
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Natural Hazards
1.
2.
Thereareaseriesofotherdeductiblesforfirelossofprofitsandindustrialallrisks(IAR)policies.
Loss History
Heavyfloodlossesinrecentyearswereasfollows:
Date
Place
Event
Number of victims
Economic and
insurance costs
2009
JSWSteel
Flood
Extensive
damage-deathtoll
unknown
Insurancelossestimate
USD50mn
2008
Bihar
Flood
Upto2,000people
perished
Unknown
2006
Surat
Flood
Atleastsixdeaths
EconomiclossUSD
109mn
2005
Mumbai
Flood
900deathsapprox
Insurancepayments
INR35bn
Devastating floods hit Mumbai (Bombay) in July 2005 resulting in exceptionally high estimated insurance
loss payments of INR 35bn (USD 792.75 mn at current rates). India's commercial capital came to a
standstill after 90 cm of rain flooded the city on 26 July, cutting off rail and bus routes, closing down
telephone lines, tripping power lines and destroying homes, both middle-class suburban villas and slum
dwellings. Most of the estimated 900 people who perished in the rising waters were shanty dwellers,
however.
The rains were the worst in living memory and the Meteorological Bureau confirmed that flooding of this
magnitudehadnotbeenseenfor100years.Financialandbankingserviceswereparalysed,whilesome
areas were under as much as two metres of water. Thousands of cars had to be abandoned and motor
insurerswereparticularlyaffectedbythedisaster.
Calls for a catastrophe pool were made after the floods. The GIC had proposed a pool of between INR
40bnandINR50bn(USD906mnandUSD1,132mn)becauseitfeltthatthiswouldimprovereinsurance
purchasingpowerandnationalreinsurancecapacity.TheplandidnotappealtotheInsuranceRegulatory
and Development Authority (IRDA), which was of the opinion that India's insurance industry had enough
capitaltoabsorblargeclaims,includingthosefollowingthefloods.
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Natural Hazards
Bushfire
Exposure
Whateverexposureexistsislimitedtoremoteareas.InJune2003,sixpeople,includingfourchildren,died
inaforestfireintheGarhwalHimalayas,northernIndia,duringascorchingheatwavethatkilledmorethan
1,200peopleacrossthecountry.Pressreportsstatedthatthevictimswerecollectingsapfromtreeswhen
they were trapped by the fire which raged in three districts, known for pine forests and colourful
rhododendrons.

Noinformationwasavailablewhenthisreportwasinpreparation.

Bushfireiscoveredwithinthestandardfireandspecialperilspolicy.

Separate tariff rates for bushfire were not applicable. The rate was included in that for standard fire and
specialperils.Sincethetariffwithdrawal,itisunderstoodthatinsurershavekeptthebushfireratewithina
globalrateforfireandperils.
Thebushfireperilwassubjecttoatariffdeductibleof5%ofthelosssubjecttoaminimumofINR10,000
(USD 227). In its Circular 019/IRDA/NL/F&U/Oct 08, however, the IRDA advised that with effect from 1
January 2009 insurers would be permitted to file variations in deductibles from those prescribed under
erstwhile fire, engineering, IAR and motor own damage tariffs subject to written disclosures and
acceptancebytheinsuredpriortofinalisationoftheinsurancepolicy.
1.
2.
Loss History
Detailedlossexperienceisunavailablebutinsuredlossesovertheyearshavebeeninfrequent.
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Natural Hazards
Subsidence
Exposure
Subsidencecanbeaproblemforconstructioninsurance(CAR)underwritersinthecaseofinfrastructure
projectsinroughterrain.Propertyinsurersexperiencesimilarproblemsincrowdedurbanenvironments.


Fire and special perils policies and other property covers such as homeowners' policies typically cover
subsidence,landslidesandrockslides.

Separatetariffratesforsubsidencewerenotapplicable.Theratewasincludedinthatforstandardfireand
special perils and homeowners' and similar policies. Since the tariff withdrawal, it is understood that
insurershavekeptthesubsidenceratewithincorrespondingglobalrates.
Deductibles are 5% of every claim. In its Circular 019/IRDA/NL/F&U/Oct 08, however, the IRDA advised
thatwitheffectfrom1January2009insurerswouldbepermittedtofilevariationsindeductiblesfromthose
prescribed under the former fire, engineering, IAR and motor own damage tariffs subject to written
disclosuresandacceptancebytheinsuredpriortofinalisationoftheinsurancepolicy.
1.
2.
Loss History
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Natural Hazards
Hail
Exposure
Teaandothercropsareparticularlypronetohaildamage.Hailstormsarecommon,especiallyinthenorth
ofIndia.Indeedtheheaviesthailstoneeverrecordedintheworldwasfoundinthenorthin1939,wherea
hailstoneweighed7.5lbs(3.4kg).ThedeadliesthailstormwasalsoinIndia,on30April1888,when246
peopleperished.
Hailisincludedwithinthedefinitionofstorminnamedperilspropertypolicyformsbutthismaybeopento
interpretationifthehailisnotaccompaniedbyrainandwind.
CRESTA
CRESTA replaces PDF maps with interactive tools.

The Catastrophe Risk Evaluating and Standardising Target Accumulations (CRESTA) organisation was
established in 1977 by the insurance and reinsurance industry as an independent body for the technical
management of natural hazard coverage. Its aim has been to establish a uniform global system for
transferring aggregated exposure data among insurers, brokers and reinsurers to facilitate accumulation
control and risk modelling. CRESTA determines country specific zones for reporting exposure data,
promotes a standard template for exchanging that data and offers a mapping service. Its standards are
widelyusedthroughouttheinsuranceindustry.
Witheffectfrom24November2009CRESTAintroducedanewinteractivetoolwhichcombinesazoning
listandmapviewer.ThemapviewerreplacestheexistingPDFmapsanduserscanviewzonesandalso
upload their own data. They can also create their own PDFs. The maps are still available in CRESTA's
archivebutwillnolongerbeupdated.
If you wish to make use of the tools or the archived maps, please visit the CRESTA website at
www.cresta.org.
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Summary and Trends
In2008-09,thatisthefinancialyearending31March2009,premiumincomeforpropertywentdownby
2.21%inlocalcurrencytermscomparedwithadropof15.69%inthepreviousyear.Alossratioof71.85%
wasrecorded.Propertypremiumsaccountedfor10.9%oftotalnon-lifepremiums(15%in2007-08).
Partofthereasonforthedropinpremiumincomeandrelatedunprofitabilitywasthefactthatfollowingthe
abolition of tariffs, the free market found itself in a fiercely competitive price war, not least in property.
Non-technical pricing has been all too common. Property rates are as much as 80% below the old tariff
levels.Inmanycasesrateshavetouchedrockbottom.Thishaspromptedmarketpractitionerstocomment
During the first half of 2010 there was some evidence of a hardening of rates, particularly in policies in
whichcoinsurancepartnerscouldagreepremiumincreases.
GICRewhichtightenedits2010-11renewaltermsforitsdomesticcedingcompaniesduetotheverypoor
technicalresults.Thecompanieshavebeenrestrictedastothevolumeofcoinsurancebusinessthatthey
cancedetotheirautomatictreatiesandalsotheamountoffacultativebusinesstheycanwrite.Thiscould
resultinmorefacultativebusinessbeingcededtoforeignmarkets.TheGICResaysthatthisisworththe
price.
As from 1 April 2010, further remedial measures involving enhanced deductibles for property and other
classes,havebeenintroducedonavoluntarybasisbytheinsurersthemselves.
Statistics
Thefollowinggraphicshowsgrosswrittenpremiumsandnetincurredlossratiosforthefive-yearperiodto
March2009.
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Major Insurers
AccordingtomarketstatisticspreparedbyInterlinkInsurance&ReinsuranceBrokersLtdbasedonofficial
data,theleadinginsurersarethefourpublicsectorinsurers,namelyNewIndia,(29%marketshare)United
India(16.9%),Oriental(13.7%)andNational(11.8%),followedbyICICILombard(8.4%)andIFFCOTokio
(5.8%)intheprivatesector.
Construction and Prevention

Building Regulations
=================================================================================
Update May 2011
Apoignantexampleofwhathappenswhendevelopersandbuildersdonotcomplywithplanningand
buildingrules,occurredinDelhiinthemiddleofNovember2010whenanillegallybuiltresidentialblock
collapsedkillingatleast66people.WhilstDelhi'schiefminister,SheilaDikshit,calledthescaleofthe
tragedy"unprecedented",criticssaidthatitwasapredictableconsequenceoftheadministration'sfailureto
providesufficienthousingortoenforcetheplanningrules.
=================================================================================
BuildingregulationsvarythroughoutthecountryalthoughthemostcommonaretheNational Building Code

and the Bureau of Indian Standards Codes. The National Building Code is a document containing
standardisedrequirementsforthedesignandconstructionofmosttypesofbuildinginIndia.Thecodewas
firstpublishedin1970.Thelatesteditioncameoutin2005and,amongstotherthings,includesup-to-date
provisionsforearthquake-resistantdesignandconstruction.
Municipal authorities from city level down to panchayat (rural district councils) are responsible for
monitoring compliance and are permitted to introduce their own codes as long as they are not
contradictory.InacountryasvastasIndia,standardsvaryconsiderably,particularlyinthecaseofprivate
residentialproperty,butmajorindustrialiststakeparticularcareinfollowingcodes.
Enquiries made both in Kolkata (Calcutta) and Mumbai (Bombay) amongst local property underwriters
confirmedthatonthewholetheyweresatisfiedthatbuildingcodeswerebeingapplied,particularlyinthe
caseoflargerprojects.
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Anexampleofalackofproperobservationofbuildingregulations,however,wasgivenplentyofpublicity
following the catastrophic earthquake in the state of Gujarat in January 2001. Then, 78 builders were
arrested after allegations that apartment blocks and other structures they had built would not have
collapsedhadtheybeenputupinaccordancewiththeregulations.Manypeoplearesaidtohaveperished
intheearthquakeasaconsequenceofthebuilders'allegednegligence.
Built Environment
Inurbanareas,buildingssuchasoffices,hotelsandapartmentblocksareofsolidconstruction,concrete,
brickandtile.Maintenancestandardsarelow.Thisisoftenduetorentcontrol,whichleaveslandlordswith
insufficientresourcestorepairtheirproperty.
Shanty towns built of the most primitive materials are a feature of all major cities in India. In rural areas
accommodationisoftenhutsofthatchroofsandwattlewalls.
Heavy industrial structures are generally of quality construction worthy of the highest international
standards.Buildingsofsteelframeandcladdingarenormalforlightindustry.
Building Cost Index

TheConstructionIndustryDevelopmentCouncilpublishestheConstruction Cost Indices (CCI),whichare
computedforIndia'smajorcities.TheCCIrepresentsavariationinthecostofanumberofinputsthatgo
intoconstructionworksandsincetheweightingoftheseinputs,suchasthecostofcement,steel,sand,
wood, wages and salaries and of equipment for the various sectors of the economy where construction
plays a major role is variable, the indices are computed for 11 sectors, such as roads, power, urban
infrastructureandbuildings.
InDecember2009theCCI Construction Cost Indexforthebuildingssectorreadasfollows:
Delhi
113.98
Kolkata
111.78
Chennai
113.46
Hyderabad
111.78
Mumbai
113.46
Bangalore
109.32
Note: base 100 at October 2007
Thenationalaveragewas112.29.
Fire Brigades
ThefirebrigadesinChennai(Madras)andMumbai(Bombay)arewellequippedandtrained.InMumbai,
forexample,thereare24firestations,whichhavemodernvehicles,manufacturedbyMercedes,Volvoand
TATA. Brigades in other large cities are understood to be competent. Enquiries conducted in Kolkata
(Calcutta)revealedthatgenerallyspeakingfireinsuranceunderwritersseemtohavefewcomplaintsabout
fire-fighting authorities in the metropolitan area. Outside such areas, however, particularly in the country,
thestandardofservicevariesagooddeal.Thestategovernmentsareresponsibleforfirebrigades.
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Airports, petrochemical complexes, ports and major industrial estates are likely to have their own fire
brigades.
Hydrants in city centres are uncommon and water shortages (a perennial problem in India) and low
pressurescanseriouslylimittheirefficiency.Watertendersarefrequentlybroughttofirestoaugmentwater
supplies.
Itisunderstoodthatwhilstfirebrigadesinmajorcitiesareequippedtodealwithfiresupto25floorlevels,
propertyunderwritershavereservationsabouttheirgeneralabilitytofightfiresintallbuildings.Mostofthe
high-risestructuresinIndiaareinthecommercialcapital,Mumbai,wheremorethan2,000suchbuildings
are already built. The city is undergoing a massive construction boom at present and many more tall
buildingsareplanned.Currently,thetallestareImperialTower1and2(bothof60floors).
Untiltwoorthreeyearsago,theheightofbuildingsinKolkatawasrestrictedto40metres.Theabolitionof
theheightrestrictionisoneofthereasonsfortheinvestmentinmodernisingtheKolkatafirebrigade.
Dryrisersareinstalledinthemoremodernhigh-risebuildingsandsomehavepumprooms,butitissaid
thatpoormaintenanceandinfrequenttestingbluntstheirefficiency.
In spite of extremely congested city streets in all urban centres, fire engines are said to circulate with
remarkablespeedintimesofemergency.
Physical Risk Management

An increasing number of insurance clients are taking risk management seriously. Education in risk
managementtechniquesisinthehandsoftheIndianInstituteofInsuranceandRiskManagementbasedin
Mumbai.Inadditiontotheinsurers'ownarrangements,theinstituteorganisesregularseminars.
Whilstlargecompaniesintheindustrialsectoremployfullyfledgedriskmanagers,mostlimitthemselvesto
having safety officers. All plants with 1,000 or more workers have a statutory obligation to employ such
officers.Earlyretirementprogrammesinthepublicsectorinsurersarereleasingwell-qualifiedseniorstaff
intothemarketandsomeoftheseareknowntohavejoinedindustrialandotherfirmsasriskmanagers.
Thisisawelcomedevelopmentthatmustbeofbenefittotheinsurancesectorasawhole.
Inaddition,thearrivalofprivateinsurancecompanies,mostwithmultinationalinsurershareholderpartners,
isprovidingastimulustothegrowthofawarenessofthebenefitsofriskmanagement.Themultinationals
areapplyingtheirampleexperiencefromotherinsurancemarkets,includingthemostindustriallyadvanced
inNorthAmerica,EuropeandJapan.Retailbrokershaveenteredthemarketsincethebeginningof2003,
andareaddingtothestimulus.
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Risk Quality
The Loss Prevention Association (LPA) founded in 1978 by GIC Re and the four state-owned insurers,
providesarisksurveyservicetoinsurers.Itspersonnelarefullyqualifiedtoofferadviceonfireprotections
andrelatedmatters.Inaddition,theinsurersthemselvesemploycompetentengineerstocarryoutsurvey
work. The association operates a salvage corps in Mumbai (Bombay). With the approval of a scheme of
amalgamationbytheMumbaiHighCourt,theLPAwasmergedwithGICRewitheffectfrom27April2007.
Sprinklers are widely used in larger industrial developments and commercial structures and they are
compulsoryinluxuryhotels.Sincetheabolitionofthefiretariffon1January2007,insurershavebeenfree
toapplytheirowndiscountsfortheinstallationoffirepreventionandfightingappliances.
Other than in the major industrial and commercial risks, housekeeping standards are not high and older
buildings in urban areas are very badly maintained. Poor plumbing and electrical wiring are common
problems.
Insured clients are likely to become more receptive to insurers' risk improvement recommendations as
competitionbetweenthepublicandprivatecompaniesencouragesawiderknowledgeofinsurancematters
amongst consumers and, with the abolition of the tariff, discounts are likely to be more generous than
previously.
Underwritershavenotcomplainedthatmoralhazardisaparticularproblem.
Social Hazards
Burglary
TheInsuranceRegulatoryandDevelopmentAuthority(IRDA)doesnotpublishseparatemarketstatistics
forburglary,althoughunofficiallyitisthoughttobeamarginallyprofitableclassofbusiness.
Asfarastheverylargestindustrialandcommercialpropertyisconcerned,burglarycanbeincludedinall
riskspolicies.Otherwiseseparatepoliciesareissuedbutthisisbecomingrarer.
Coverisrestrictedtolossfollowingforcibleorviolententryorexit.Larcenyisexcluded.Rates,whichhave
not been subject to either a tariff or market agreement, range from 2.5 to 7.5. The higher rates are
appliedifthereisnosupportingbusiness.Policiesareavailableonafirstlossbasis.Residentialandretail
risksarecoveredunderhomeowners'andshoppoliciesforbothburglaryandlarceny.Itisunderstoodthat
normallydeductiblesarenotapplied.
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The burglary risk can be measured by reference to official crime figures even though these are rather
crude. According to the National Crime Records Bureau (NCRB), in 2004 there were 90,000 cases of
burglaryand270,000incidentsoftheft.TheNCRBadmittedthatsuchstatisticsarelikelytounderstatethe
prevalence of crime. Many crimes go unreported owing to a lack of confidence in the police. By 2008,
burglarycasesamountedto93,742andtheftto316,761.
Reinsuranceisplacedunderpropertytreaties.
Therearenoseparatemarket-widepremiumandlossstatisticsforburglaryinsurance.
Arson
Arson in general is not considered to be a problem, but there can be exceptional incidents such as the
Gujarat riots in March 2002. Claims for damage to property due to rioting between Hindus and Muslims
werereservedforanamountofINR149croresorINR1.49bn(USD30.90mnin2002).Pressreportsin
July2002allegedthatalargepercentageoftheclaimswereeitherfraudulentorgrosslyinflated,withsome
claimantssaidtohavesetfiretotheirestablishmentsthemselvestoclaimmoreinsurancemoney.
Strikes, Riots and Civil Commotions

SRCCinsuranceisreadilyavailableandincludesmaliciousdamage.Coverisincludedinthestandardfire
and special perils policy. Since the abolition of the fire tariff, SRCC premium rates are those which each
insurerhasfiledwiththeregulator,theIRDA.
TheriskofcommunalviolenceinIndiaishighgivenitspropensitytopoliticalvolatilityandthetraditional
ethnicandreligiousrivalry,encouragedbyextremesofpoverty.Detailsofmajorincidentsofcivilunrestin
recentyearsaregivenbelow.
Seriousriotingfollowedtheassassinationoftheprimeminister,IndiraGandhi,inOctober1984,resultingin
insuredlossesofUSD90mn,whichpenetratedtheexcessoflossprotections.
In1992-93,thedemolitionoftheMosqueBabriMasjidinAyodhyabyHindumobsledtowidespreadrioting
and violence, particularly in Mumbai where underground Muslim groups planted bombs in retaliation.
InsuredlossestotalledUSD18.50mn.
Claims for damage to property arising from the rioting between Hindus and Muslims in Gujarat in early
2002generatedaninsurancemarketreserveof149croresorINR1.49bn(USD30.90mnin2002).On27
FebruaryacarriageofatraintravellingfromAyodhyatoAhmedabadwasuncoupledatGodhrainGujarat
andsetonfireand57Hindupassengerswereburnedtodeath.Asthenewsspread,mobsinAhmedabad
beganattackingMuslimsandburningtheirshopsandhouses.Theriotsspreadveryquicklytoothercities
andvillagesthroughoutGujarat.Nearly1,000people,mostlyMuslims,werereportedtohavedied.Another
110,000fledtorefugeecamps.
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Terrorism
Aterrorismpool,managedbythemarketreinsurer,theGeneralInsuranceCorporationofIndia(GICRe),
wassetupbythemarketandcameintoeffecton1April2002,wheninternationalreinsurerswithdrewtheir
support for terrorism insurance. Since that date local underwriters have been prepared to cover the risk
subject to a surcharge, which is passed to the pool. Since no reinsurance support could be obtained to
protectit,thepool'slimitperlossisrestricted.On1April2008thelimitwasincreasedtoINR750croresor
INR 7.50bn (USD 169.88mn) per location or compound with rates revised upwards. Market participants
suggestatleast18physicalrisksareconsideredtobetoobigforthepoolandthereforemustseekcoverin
theinternationalmarketifitisavailable.
Rateswerefurtherincreasedwitheffectfrom1April2009withoverallchangeinliability.Coverappliesto
fire,engineeringandindustrialallrisks(IAR)policies.
AttacksbyterroristgroupsarecommoninIndia.In2008,theweeklymagazineIndia Todayestimatedthat
around1,100peoplehavediedin69Islamistandotherterrorattacksthroughoutthecountrysince2000.
Someofthemostrecentaredescribedbelow.
InsurersexpectedtheclaimsarisingfromthebombattacksinDelhiinOctober2005tobenomorethan
INR50croresorINR500mn(aroundUSD11.34mnatthattime)asmostshopsandtheirstockswere
either uninsured or underinsured. The basic shop package policy does not cover terrorism unless
purchasedasanadd-on.Thetotalclaimscouldhaveincreasedsignificantlyhadshopownersbeenable
toprovetheactualvalueoftheirstocksatthetimeoftheattacksatthefestivalsofDiwaliandEid.Most
shopskeephugestocksduringfestivalseasonsanditisunlikelythatadequateinsurancewouldhave
beeninplaceatthetimeofthebombblasts.
On14May2008aterrorattackinJaipur,thecapitalofthestateofRajasthan,killedabout80people.A
little-known Islamist militant group calling itself the Indian Mujahedeen claimed responsibility for the
attack.
BombblastshitBangaloreon25July2008andAhmedabadthefollowingday.
On 26 November 2008, a group of terrorist gunmen attacked various prime locations in Mumbai
(Bombay) including the Chhatrapati Shivaji (Victoria) railway terminus and two of the country's most
luxurious hotels, the Taj Mahal and the Oberoi. It was reported that 179 people died at a number of
locations throughout the city and property damage, particularly at the hotels, was extensive. The two
landmark hotels have terrorism insurance. Whilst the Taj is understood to be insured jointly by the
private sector insurers TATA AIG (65%), ICICI Lombard 30% and IFFCO Tokio, the Oberoi is insured
primarily by the public sector company, United India. The pool suffered its greatest loss since its
inceptionin2002asaresultoftheseattacks.ThelosstothepoolwasestimatedatINR500croresand
INR 50 crores were released as "payment on account". The pool is protected by an excess of loss
reinsuranceprogramme.AlossinexcessofINR150croreswillberecoveredfromreinsurers.Thefinal
payoutisexpectedtobebetweenINR5bnandINR6bnincludingbusinessinterruptionclaims.
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On13February2010abombinacafethatispopularwithforeigntouristsandlocalstudentskillednine
peopleinthecityofPoona,about60miles(97km)south-eastofMumbai.Thiswasthelatestinawave
ofattacksinIndiainrecentyears.Policebelievethatthislatestattackispartofaterrorcampaignaimed
at damaging the tourist industry in a year when the Commonwealth Games were being held in Delhi,
withmanyoverseasvisitorsexpected.
In addition to terrorist attacks from Islamist groups, Naxilist (Maoist) insurgents are causing serious
problems for Indian security forces in various regions of India with Chhattisgarh now at the heart of the
conflict.TheinsurgentstracetheirorigintoanarmedstruggletoempowertheruralpoorinWestBengalin
1967.
In early 2009 the insurance press reported a marked increase in the demand for terrorism cover in that
year'srenewalseason.ThehighprofileterroristattacksinMumbaiinNovember2008promptedasurgeof
enquiriesaboutterrorisminsurance.Premiumsforthiscoverwentupwitheffectfrom1April2009withthe
resultthatinsuredsfacedanincreaseofbetween20%and30%incosts.
Householder/Homeowner
Summary and Trends
Untilitsabolitionon1January2007,fireandspecialperilspoliciesfordwellingswereissuedinaccordance
withtheprovisionsofSection IIIofthefiretariff.Marketpenetrationforresidentialinsuranceremainslowin
spiteofthefactthatmoreandmoreIndiansowntheirownproperty.Companieshavemadenewbusiness
andrenewalprocessingeasierandmoreclientfriendlywiththeintroductionofonlineandtelesalesinan
attempt to attract more business. Cultural indifference to insurance is proving to be taking a long time to
overcome.Itisthoughtthatinsurersneedtospendmoretimeandmoneyineducatingpotentialclientele.
Banklendingtoprivatehouseholdshascontinuedatwhathasbeendescribedasanunprecedentedpace
as the newfound prosperity of the Indian middle class has changed old habits. It seems that debt has
becomemoreacceptableinacountrywhichtraditionallyfocusesonsavings.
The Indian government considers housing to be a "thrust sector" which qualifies it for a number of
incentives.Allhomeloanborrowerswhotookouttheirloansonorafter1April1999areentitledtoatax
deduction on the interest up to INR 150,000 (USD 3,398) annually, as long as the acquisition or
construction is completed within three years of taking out the loan. Repayments of the principal of a
housingloanaredeductibleuptoINR20,000(USD453)annually.
ProfitsofapprovedhousingprojectsenjoyataxholidayinaccordancewiththetermsoftheIncome Tax
Act. Housing companies may claim tax exemption for reserves set out of profits earned from long-term
lending.
Statistics
Statistics for residential risks are included in the overall fire results and therefore it is not possible to be
specificaboutexperienceinthisclass,althoughmarketpractitionersareoftheopinionthatitisprofitable.
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ApprovedtariffwordingsremainineffectuntiltheIRDAadvisestothecontrary.
Thefireandspecialperilspolicycoversfireandaseriesofadditionalperilssuchaslightning,explosion,
smoke,impact,riots,strike,maliciousdamageandweatherperils.
A household comprehensive policy covers buildings and/or contents against fire and a wide range of
specialperilsand,inaddition,thefollowing:
burglaryandhousebreakingincludinglarcenyandtheft
allrisksforjewelleryandvaluables
plate glass and breakdown of domestic appliances, loss or damage to television sets including
VCP/VCR,andpedalcycles(allrisks)
baggageinsurance
personalaccident
publicliability.

Tariff rates were abolished on 1 January 2007. Since then insurers have applied their own rates and
premiumshavereducedinthefaceoffreecompetition.Atypicalmarketrateatpresentis0.30permilleon
buildingsandcontents.Aleadingstate-ownedinsurerreportedthatitdoesnotapplydeductibles.Thismay
bethecaseinotherpartsofthemarket.
Premiumratemovementssincethebaseyearof2006aresummarisedasfollows:
Simple risk rate movements
2009
70
2008
80
2007
85
2006(baseyear)
100
Loss Experience
Market reports in August 2005 suggested that the four publicly owned non-life insurers were considering
removingtheword"flood"fromhouseholdpoliciesfollowingthecalamitousfloodsinandaroundMumbaiin
July 2005. The move came as claims arising from the catastrophe, which left around 900 dead, were
presented to the four companies, for whom estimated losses exceeded INR 15bn (USD 340.14mn). A
typical household policy covers flood, and after receiving claims from over 10,000 policyholders, insurers
weretryingtolimittheimpactofnaturaldisastersasforecasterspredictedfurtherrainstorms.
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Apart from the exceptional and negative impact of the Mumbai and Surat floods, and in the absence of
statistics,itissaidthatthehouseholdinsuranceclassisprofitable.Themosttroublesomeclaimsaresaid
tobethosefrombreakdownstoair-conditioningandcomputerequipment.
Reinsurance
Reinsuranceisincludedintheinsurer'spropertyarrangementsforsurplusandexcessprotection.
Major Insurers
Each of the four state-owned non-life insurers writes both fire and special perils dwellings policies and
household comprehensive and they remain the major carriers. But the private insurers are making an
impact.
Intheabsenceofseparatestatisticsfortheseclassesofbusiness,itisimpossibletosaywhattheranking
ofinsurersisintermsofmarketshare.
Distribution
Household insurance is distributed chiefly by agents, bancassurance and, to an increasing extent, online
andbytelephone.
Industrial and Commercial

Summary and Trends
Therearenoseparatestatisticsrelatingtothisclass,althoughclearlythemajorityofpropertybusinessis
comingfromindustrialandcommercialsources.
In2008-09,thatisthefinancialyearending31March2009,premiumincomeforpropertybusinessoverall
wentdownby2.21%inlocalcurrencytermscomparedwithadropof15.69%inthepreviousyear.Aloss
ratio of 71.85% was recorded. A number of large fires occurred during the year. Property premiums
accountedfor10.9%oftotalnon-lifepremiums(15%in2007-08).
Partofthereasonforthedropinpremiumincomeandrelatedunprofitabilitywasthefactthatfollowingthe
abolition of tariffs, the free market found itself in a fiercely competitive price war, not least in property.
Non-technical pricing has been all too common. Property rates are as much as 80% below the old tariff
levels.Inmanycasesrateshavetouchedrockbottom.Thishaspromptedmarketpractitionerstocomment
During the first half of 2010 there was some evidence of a hardening of rates particularly in policies in
whichcoinsurancepartnerscouldagreepremiumincreases.
Many major urban centres are experiencing a construction boom which augurs well for a property
insurancemarketlookingfornewinsurablerisks.
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Statistics
There are no separate figures for industrial and commercial business, but it is clear that most property
insurance premiums and claims emanate from this sector. Total property figures are shown at the
beginningofthissection.

Although the fire premium tariff was abolished on 1 January 2007, wordings such as those mentioned
belowcontinueinuseuntiltheIRDAadvisestothecontrary.Somerelaxationwasintroducedon1January
2009.
Theoldtarifffireandspecialperilspolicycoversfireandaseriesofotherriskssuchaslightning,explosion,
smoke,impact,riots,strike,maliciousdamageandweatherperils.Inaddition,thereiscoveramongstother
things for bursting and/or overflowing of water tanks and apparatus, leakage from automatic sprinkler
systems,pollutionorcontaminationresultingfromanyoftheaforementionedperilsandbushfire.
Thepolicyautomaticallycoversarchitects',surveyors'andconsultingengineers'feesupto3%oftheclaim
amountandexpensesincurredfortheremovalofdebristoclearthesite,upto1%oftheclaimamount.
Stockdeclarationandfloaterpoliciesareavailable.Thedeclarationpolicy'sminimumsuminsuredisINR1
croreorINR10mn(USD226,500).Monthlydeclarationsneedtobemadeonanyoneoftwobasesbefore
thelastdayofthesucceedingmonth.Thetwobasesaretheaverageofthehighestvaluesatriskoneach
dayorthehighestvalueonanydayofthemonth.Arefundofpremiumisavailableupontheexpiryofthe
policybasedontheaveragedeclaration,upto50%oftheprovisionalpremium.
Package policies are available for shops, offices, hotels, educational institutions and others. Covers are
widerthanfireandperilspoliciesinthattheyincludeadditionalinsurancessuchaslossordamagetoneon
signs, fidelity guarantee and loss of profits. A minimum of four sections of the policy can be chosen with
correspondingpremiumdiscounts.
Industrial units (excluding petrochemical risks) having sums insured of INR 100 crores or INR 1bn (USD
22.65mn) and above in one or more locations in India are eligible for cover under an industrial all risks
(IAR)policy.Thisprovidesacomprehensiveinsurancecoverforallperilsexceptthosethatarespecifically
excluded.Thepolicycoversmachinerybreakdown,boilerexplosionandelectronicequipmentbreakdown.
The premium depends on the exact cover that is chosen, the claims experience, deductible and the risk
assessmentreport.Deductiblesare5%ofmaterialdamageclaimamountsubjecttoaminimumofINR5
lakhsorINR500,000(USD11,325)andamaximumofINR50lakhsorINR5mn(USD113,250),andthree
days'grossprofitforbusinessinterruptionclaimssubjecttothesameminimumandmaximumdeductibles
asthoseforthematerialdamageclaims.
"Forthepurposesoftheseguidelines,largerisksare:
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insurances for total sums insured of INR 2,500 crores or INR 25bn (USD 566 mn) or more at one
locationforpropertyinsurance,materialdamageandbusinessinterruptioncombined
Inthewordsoftheguidelines,"thesearetypicallyinsurancesthataredesignedforindividuallargeclients,
and where the rates, terms and conditions of cover may be determined by reference to the international
markets." The ways and means of making such reference are clearly explained in the guidelines. A
petrochemicalplant,forexample,whichisexcludedfromIARcoverage,ismorelikelytoqualifyfor"large
risk"treatment.
Business Interruption
Lossofprofitsorbusinessinterruptioncoverisgiveneitherasaseparatepolicyorasanextensiontothe
firepolicy.Aminorityofclientshavesuchinsurance.
WordingsarebasedonthoseusedintheBritishmarket.Typicaloperativeclausesreadasdetailedbelow.
Coverisforlossofprofitsdueto:
reductioninturnover
increaseincostofworking.
Theamountpayableasindemnityis
inrespectofareductioninturnover:thesumproducedbyapplyingtherateofgrossprofittotheamount
bywhichtheturnoverduringtheindemnityperiodshall,inconsequenceofthedamage,fallshortofthe
standardturnover
inrespectofanincreaseinthecostofworking:theadditionalexpenditurenecessarilyandreasonably
incurred for the sole purpose of avoiding or diminishing the reduction in turnover which but for that
expenditurewouldhavetakenplaceduringtheindemnityperiodinconsequenceofthedamage,butnot
exceedingthesumproducedbyapplyingtherateofgrossprofittotheamountofthereductionsthereby
avoided.
Ratesforlossofprofitstakeintoaccounttheindemnityperiod,andarebasedonpercentagesofthebasic
fireandspecialperilsrate.
Thepolicycanbeextendedtocoverlossofprofitsdueto:
accidentalfailureofpublicgas/electricity/watersupply
damagetocustomers'premisesduetotheperilscoveredundertheinsured'sfirepolicy
damagetosuppliers'premisesduetotheperilscoveredundertheinsured'sfirepolicy.
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Thetariffderegulationofthenon-lifemarkethasresultedinapricewarwithnon-technicalpricinginmost
cases,especiallyasthescrambleformarketsharecontinues.Inpropertyclassesratescontinuetobeas
much as 80% below the old tariff levels. Market practitioners comment ruefully that "premiums are what
brokerageusedtobe".
Duringthefirsthalfof2010,however,therehasbeensomeevidenceofahardeningofratesparticularlyin
policiesinwhichcoinsurancepartnerscouldagreepremiumincreases.
Thecurrent"internalguiderates"permillechargedforbuildingsbyaleadingstate-ownedpropertyinsurer
foravarietyofoccupationsareasfollows:
Hotels&restaurants
1.26
Spinningmills
1.75
Compositemills
1.50
Chemicalmanufacturing
2.00
Sugarmills
1.05
Teaprocessingfactories
1.75
Jutemills
3.15
Sawmills
3.85
Themovementsofpremiumratessincethebaseyearof2006aresetoutbelow.
Industrial and commercial risk rate movements
2009
20
2008
25
2007
50
2006(baseyear)
100
Erstwhile tariff deductibles were 5% of each and every claim subject to a minimum of INR 10,000 (USD
227).InitsCircular 019/IRDA/NL/F&U/Oct 08,however,theIRDAadvisedthatwitheffectfrom1January
2009insurerswouldbepermittedtofilevariationsindeductiblesfromthoseprescribedundertheformer
fire,engineering,IARandmotorowndamagetariffssubjecttowrittendisclosuresandacceptancebythe
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1.
2.
Althoughtariffratesnolongerexist,allothertermsandconditionscontinueinuseuntiltheIRDAadvises
further.
Major Risks
With increasing capacity and the use of coinsurance, the local market can absorb a growing number of
majorrisks.
Inacountrywhichinthepastdecadehasbeenopenedupincreasinglytoprivateandforeigninvestment,
industrialdevelopmenthasgrownsteadily:existingindustrialcentreshaveexpandedandnewoneshave
appeared, although less so in the past 12 months. The principal target risk area is the Thana/Bhelapur
IndustrialBeltinMumbai.
Someofthelargestrisksforwhichabreakdownbetweenmaterialdamageandlossofprofitsisavailable
are shown below. Sums insured are as estimated at the beginning of 2007. It is likely that upwards
adjustmenttothesefigureswillhavebeenmadesince.
Risk
Location
MD
LOP
RelianceIndustries
Jamnagar
206,191
50,000
RelianceIndustries
Sums insured (INR mn)
Hazira
96,270
39,000
Numaligarh
25,124
6,195
GNFC
Bharuch
24,546
6,500
IspatIndustries
Raigad
31,244
6,000
Kota
10,897
5,200
65,230
11,200
NumaligarhRefinery
ChambalFertiliser
HaldiaPetrochemicals
Haldia,WBengal
Source: GIC Re
Loss Experience and Largest Losses

In spite of the fact that there were no large natural hazard losses in 2008-09 a loss ratio of 75.72% was
recorded.Anumberoflargefiresoccurredduringtheyear.
Since 2001-02, examples of more notable fire and business interruption losses are as follows. Details of
earthquake, windstorm and flood losses are provided in the Natural Hazards chapter of this report. The
followingfigures(inINRmnandUSDmn)areacombinationofreservesandsettlements.
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Property
INR mn
USD mn
250
5.30
1,490
30.90
200
4.40
1,020
23.13
Balcoaluminiumplantfire
1,500
36.28
RelianceIndustries,Jamnagar
refinery
2,500
60.46
500
11.49
2,000
45.30
2001-02
ArraycomIndia
Gujaratriots
2003-04
BSESKeralaPower(damageto
turbineatpowerstation)
2004-05
IndianOilCorporationrefinery
2006-07
2007-08
AlokIndustries
2009-10
IndiaOil(IOC)storagedepotin
Jaipur
Source: GIC and insurance press.
Details of the fire which destroyed the Bombay High North oil platform in July 2005 with an estimated
insurancelossofUSD260mnaregivenintheEnergysectionofthisreport.
Major Insurers
AccordingtomarketstatisticspreparedbyInterlinkInsurance&ReinsuranceBrokersLtdbasedonofficial
data, the leading overall property insurers are the four public sector insurers namely New India, (29%
market share) United India ( 16.9%), Oriental (13.7%) and National (11.8%), followed by ICICI Lombard
(8.4%) and IFFCO Tokio (5.8%) in the private sector. These companies are likely to be the leading
industrialandcommercialinsurersaswell.
Reinsurance
Latestinformationsuggeststhatpropertytreatycapacityinthemarketincludingcatastrophiccovers,varies
between INR 187 crores or INR 1.87bn (USD 42.36mn) and INR 525 crores or INR 5.25bn (USD
118.91mn), previously INR 421 crores or INR 4.21bn (USD 95.36mn), depending upon the insurer's net
retentionandnetworth.
Distribution
Thelargestindustrialandcommercialrisksarelikelytobehandledtoanincreasingextentbybrokersas
opposedtoadirectbasis.
Agriculture
Summary and Trends
AmongstotherthingstheInsurance Regulatory and Development Authority Act 1999obligesallinsurersto
provideaservicetotheruralsector.
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In this sector, animal husbandry is significant, particularly among small farmers. The authorities are
encouraginglivestockinsurance,especiallyforcattle,andcoverisalsoavailableforothersortsoffarmand
working animals. In addition the market caters for bloodstock insurance. Horseracing is a very popular
sportinIndia.
A special feature of the Indian market is the low price of rural insurance schemes, many of which are
effected on behalf of central and state governments to meet the needs of the country's vast but far from
affluent farming community. These schemes include insurance of pump sets used for small irrigation
projects,whichareindispensableforthesuccessfulcultivationoflargeareasofotherwisedryland.
Insurers also offer programmes for horticultural and plantation crops. The market's one and only
professional reinsurer, the state-owned General Insurance Corporation (GIC) continued to offer crop
insuranceevenafteritlostitspositionastheholdingcompanyofthefourpublicinsurersandconcentrated
on reinsurance. The crop insurance was offered through the National Agricultural Insurance Scheme
(NAIS).Thebusinesswastransferredtoanewlyconstitutedcompany,theAgricultureInsuranceCo(AIC)
witheffectfromApril2004.ThenewcompanywasgrantedaregistrationinOctober2003withGICasthe
majorshareholderwitha35%stake.TheNationalBankforAgricultureandRuralDevelopmentholds30%
andthefourpublicinsurers8.75%each.
TheInsurance Regulatory and Development Authority (Micro-Insurance) Regulationsweregazettedon10

November2005andaredesignedtoensurethatthebenefitsofinsuranceprotectionreachpotentialclients
ofmodestmeansinruralIndiaandwhataredescribedasthemorevulnerablesectionsofthepopulation
asawhole.Micro-insuranceembracesaseriesofdefinedlifeandnon-lifeinsuranceproductsanddelivery
functions. The regulations anticipate that non-government organisations, self-help groups, co-operatives
andmicro-financeinstitutionswillactasagentsforthedistributionofmicro-insuranceproducts.
Theregulationsdefinenon-lifeorgeneralmicro-insuranceproductsas"anyhealthinsurancecontract,any
contract covering the belongings such as hut, livestock or tools or instruments or any personal accident
contract,eitheronanindividualorgroupbasis."
Commissionfornon-lifemicro-insuranceislimitedto15%ofgrosspremiums.
Statistics
ThefinancialperformanceoftheAgriculturalInsuranceCompany(AIC),themarket'sspecialistinsurer,in
INRmnforthefive-yearperiodto2008-09wasasfollows:
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Property
2004-05
2005-06
2006-07
2007-08
2008-09
Netpremium
4,550
5,510
5,590
6,361
7,426
Netclaims
2,770
5,190
5,510
5,295
5,296
U/wprofit/loss
2,170
660
620
2,105
3,089
Profitbeforetax
2,240
830
850
2,494
3,559
Profitaftertax
1,690
520
500
1,613
2,326
Networth
2,830
3,360
3,850
5,265
7,326
Source: Asia Insurance Review. Country Profile - India January 2008 and IRDA Annual Report 2008-09

Crop insurance, which is offered through the NAIS and administered by AIC, provides comprehensive
insuranceforcropyieldlossesarisingfromnon-preventableriskssuchasnaturalfireandlightning,storm,
includinghail,cyclone,typhoon,tempest,hurricane,tornado,floodandmudslide,drought,pest/diseases
etc. NAIS is available to all farmers irrespective of the size of their holdings. The scheme envisages
coverageforallcropsincludingcereals,pulsesandoilseeds.
Insuranceisavailableforcattleandothersortsofanimalssuchassheep,goats,camels,pigsandworking
elephants, not to mention honeybees and silkworms. In addition, the market caters for bloodstock
insurance:horseracingisaverypopularsportinIndia.Fishfarmersaresoldpoliciesforbothbrackishand
freshwaterprawns.
A recent addition to the covers that can be purchased in the agricultural insurance market is the Varsha
Bima (monsoon insurance policy). This is a policy which AIC launched in mid-2005, and provides cover
against deficit rainfall during the ongoing primary crop season ie coverage against a 20% or greater
shortfallfromthenormalrainfallataparticularplaceduringtheJunetoSeptembermonsoonseason.
The IRDA Annual Report 2008-09 reveals that the government is considering a proposal to introduce a
comprehensiveinsuranceforplantationandspicescropssuchastea,rubber,coconut,tobacco,cardamom
and pepper. At the same time, a pilot scheme designed by AIC in association with the Coconut
DevelopmentBoardwasreadyforlaunchinginabout20districtsspreadoversevenstates.
Private insurers are also involved in agricultural insurance. For example, IFFCO Tokio offers a product
knownasBarishBimaYojana(RainfallInsuranceScheme),whichprovidesprotectionagainstanticipated
shortfallincropyieldduetodrought.

The Varsha Bima policy issued by the AIC covers anticipated shortfall in crop yield on account of deficit
rainfall. According to the AIC the sum insured is "pre-specified" and normally is between the cost of
productionanditsvalue.Inthecaseof"sowingfailure"cover,thesuminsuredisthemaximuminputcost
incurredbythecultivatoruntiltheendofthesowingperiod,whichagainispre-specified.
The premium may vary from one cover option within the policy to another and from crop to crop. The
premiumshave,accordingtotheAIC,been"optimised"inrelationtobenefitsandstartfrom1%.
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Loss Experience
In 2008-09 the AIC loss ratio was 83.2% (net incurred losses to net earned premiums). The ratio was
71.3%in2007-08.
Major Insurers
IntheabsenceofrelevantstatisticsitisestimatedthatAICistheleadinginsurer.
Reinsurance
GIC Re's Annual Report 2008-09 stated that "it continued its agricultural reinsurance portfolio during the
year by providing reinsurance support for agriculture (crop/livestock) and weather insurance business of
domestic as well as foreign insurers under proportional treaties, stop loss contracts and facultative
arrangements".
Hail
Teaandothercropsareparticularlypronetohaildamage.Hailstormsarecommon,especiallyinthenorth
ofIndia.TheheaviesthailstoneeverrecordedintheworldwasfoundinnorthIndiain1939andweighed
7.5lbs(3.4kg).ThedeadliesthailstormwasalsoinIndia,on30April1888,when246peopleperished.
Itisunderstoodthathailisincludedwithinthedefinitionofstorminnamedperilspropertypolicyformsbut
thismaybeopentointerpretationifthehailisnotaccompaniedbyrainandwind.
Inmid-June2009,fiercethunderstormsunleashedbarragesofgianthailstonesacrossnorthernIndiaand
killed27people.Thestormswerepromptedbytemperaturesreachingupto49C(121F)thatclashedwith
colderairhigherup.
Glass
Nodetailsofinsurancesforgreenhousesandthelikewereavailable.
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Construction and Erection all Risks
Summary and Trends
Construction produces about 7% of India's GDP and employs an estimated 40 million people in full and
part-timejobs.Theindustryhasbeenoneofthefastestgrowingpartsoftheeconomyinrecenttimeswith
anannualgrowthof9.8%in2007-08.
Itaccountsforapproximately40%ofthegovernment'scapitalexpenditurewithinthecurrentfive-yearplan.
At the present time the country's infrastructure industry is going through an unprecedented boom phase,
largely due to the growth of the economy, which is forecast to rise by 8% to 9% annually. Substantial
investmentisneededtosupportsuchagrowthintheinfrastructuresector,thatistosayinroads,airports,
ports,powerandtransportsystems.Thesectorhasseenmajordevelopmentsinthepastfewyearsbuta
lotofworkstillhastobedone.Accordingtothe11thFiveYearPlan,Indiarequiresatotalinvestmentof
betweenUSD258bnandUSD281bnby2012.
Outsidetheinfrastructuralsectoroftheconstructionindustry,residential,commercialandindustrialbuilding
is scaling new heights in terms of growth. Ever-increasing activity follows the government's decision to
open up the industry to foreign investors 100% from early 2006 coupled with the impact of the booming
economy.
Marketpractitionersreportthatconstructioninsurance(CAR/EAR)isbenefitingfromthisstateofaffairsin
termsofincreasednewbusinessopportunities.Futurebusinessislikelytobewrittenwithgreatercarein
underwritingingeneralandatmoretechnicalratinginparticular,inordertoachievebetterresultsthanat
present. In May 2010, one senior CAR practitioner told Axco that, in his opinion, losses in construction
insuranceweredueto"sloppyunderwriting".
Statistics
Statistics provided by Interlink Insurance & Reinsurance Brokers Ltd are available to Axco for the
three-yearperiodto31March2009.
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Hazard
InacountryasvastasIndia,whichembracessomanydifferentclimaticconditions,constructionriskscan
be subject to losses from a variety of natural perils. Subsidence can be a problem in the case of
infrastructure projects in rough terrain. Theft of construction supplies including targeted material such as
copperandaluminiumiskeptundercontrolbythejudiciousapplicationofdeductibles.
At the present time, a considerable amount of underground work in urban areas involves greater risks.
Suchworkisfortheconstructionofunderpassesforvehiclesandaboveall,metrorailways,suchasthose
in Mumbai, Calcutta and Bangalore. In some instances, tunnels pass under the sea or rivers which
increasestheriskoffloodandcollapse.
Other risks that are fairly new in so far as CAR underwriting is concerned are increasingly tall buildings.
Currently,thetallestareImperialTower1and2(bothof60floors)inMumbai.Newprojectsplanfortowers
of70ormorefloors.
Building Contract Conditions

Itseemsthatbothemployersandmaincontractorscanberesponsibleforarranginginsurance.Thisisnot
always CAR/EAR. Some contractors are happy to take out fire only on small projects. Indemnity periods
canbe12andsometimes24months,whatevertheformofcover.
Those who fund significant projects sometimes insist on advanced profits and delayed completion
insurance, particularly when the construction of power projects and toll roads is involved. There is no
evidence to suggest that the funders have other special requirements such as latent defect or decennial
insurance. Limits of indemnity of INR 250mn (USD 5.66mn) for construction professionals' PI have been
encounteredinthemarket.ItisnotknownwhethersingleprojectPIisavailableornot.

CAR/EAR and engineering are written as a separate class but fire and liability perils are not hived off to
theirrespectivedepartments:offshorestructuressuchasoilrigsareinsuredinthemarinedepartment.
MunichRewordingsarelookeduponasstandardforuseintheIndianinsurancemarketalthoughUSjoint
venture contractors and sub-contractors often ask for wider American market wordings. These are
acceptableifapprovedbytheTariffAdvisoryCommittee(TAC).
Additionalcoverssuchasadvancedlossofprofitsanddelayinstart-upcostsaregivenasextensionsto
basicCAR/EARpolicies.Contractors'plantandequipmentmaybecovered.
Reinsurershavelessinfluencethanpreviouslyoverthecoversbecauseoflargerlocalretentionsandan
increaseincoinsurance.
Contractors' Liability
Standardpoliciesrestrictthirdpartyliabilitylimitsto10%ofthecontractvalue.Ifhigherlimitsarerequired,
a separate policy is issued. Multinational funders and/or contractors often require unlimited liability,
althoughnotallinsurersarepreparedtogivethis.
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On 1 January 2007, premium rates applicable to fire, engineering (CAR), motor (except third party only
cover),workers'compensationandotherclassesofbusinesspreviouslyundertariffswerewithdrawn.
The CAR tariff-free rating and deductibles of the very largest projects are less influenced by the
requirementsofexternalreinsurersthanpreviously,aslocalinsurershavelargerretentionsandtherehas
beenanincreaseintheuseofcoinsurance.
Currentratesforroads,bridgesandpublicworksdependonthesizeoftheworks,thecontractvalueand
the period of insurance. The rate for conventional buildings insured with a typical 24-month period of
indemnityisaround0.60.
Additionalcoverssuchasadvancedlossofprofitsanddelayinstart-upcostsaregivenasextensionsto
basicCAR/EARpoliciesandsometimesfreeofchargeduetofiercecompetitionbetweeninsurers.
PartofthereasonforCAR'spoorlosshistoryinrecenttimesisthatfollowingtheabolitionoftariffs,thefree
marketfounditselfinafiercelycompetitivepricewarasmuchinconstructionasinproperty.Inmanycases
ratestouchedrockbottom.Thishaspromptedmarketpractitionerstocommentruefullythat"premiumsare
whatbrokerageusedtobe".Itisunderstoodthatalltoooftentherehasbeenlittleornoriskunderwriting
andthatinsurersstrivetosecureandretainimportantbusinessatalmostanyprice.
InsofarasCARandEARareconcerned,"alldeductibleamountsappearingintheTACtariffshouldbe
increasedtofivetimesofthetariffminimumamounts".
Separatetimeexcessesarestipulatedforthefollowing:
CARandEARpoliciescoveringrisksotherthanspecialisedrisks:advancelossofprofitstimeexcess:
30daysforthefirstyearplusonedayforeacherectionmonthinadditionto12monthsnotexceeding60
days.
CAR and EAR policies covering specialised risks, that is to say all works in water, dams, canals,
hydropower projects, tunnels, irrigation systems, and caverns: advance loss of profits time excess: 45
daysforthefirstyearplusonedayforeacherectionmonthinadditionto12monthsnotexceeding75
days.
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Deductiblesforcontractors'plantandmachinerypoliciesvaryaccordingtothevalueoftheequipmenttobe
insured.
Loss History
MarketpractitionersreportthattheCARaccountisprobablyrunningataloss.Somewouldsaythatthisis
thepricepaidforaboomingeconomy.Threeexamplesoffairlylargeclaimsareasfollows.
Kota Bridge
AccordingtopressreportsattheendofDecember2009,atleast17peoplewerekilledand30otherswere
feared trapped or drowned after a bridge that was under construction at Kota over the Chambal River in
Rajasthancollapsed.ItisunderstoodthatthebridgewasbeingbuiltinajointventurebytheSouthKorean
firm,HyundaiEngineering,andthelocalcompany,GammonIndia.Workhadbeenunderwaysince2007
andwasdescribedasamajorproject.Atthetimethatthisreportwasinpreparation,noinsurancedetails
wereavailableexcepttosaythattheinternationalreinsurancemarketconsideredthelosstobesubstantial.
Prestige Estate Project, Bangalore
Aplanned18-storeyapartmentblockreached15storeysandcollapsed.ThetotalestimatedclaimwasINR
11croresorINR110mn(USD2.49mn).InMay2010,aninterimpaymentofINR7.5croresorINR75mn
(USD1.70mn)hadbeenpaid.
Hotel Horizon (five star hotel) Mumbai
Afirehydrantpipeburstandfloodedthebasementofthebuilding.TheestimatedlosswasINR8croresor
INR80mn(USD1.81mn).
Major Insurers
AccordingtoInterlinkInsurance&ReinsuranceBrokersPvtLtdtheleadingengineeringinsurersin2008-09
werelistedasfollowswithpercentagemarketshares.
NewIndia
18.3%
Oriental
16.7%
UnitedIndia
15.7%
ICICILombard
11.4%
National
10.5%
RelianceGeneral
7.5%
Reinsurance
Boththepublicandtheprivateinsurersareobligedtocede10%ofeachandeveryCAR/EARrisktothe
General Insurance Corporation (GIC), the market's designated professional reinsurer. After arranging the
obligatory cessions, insurers, both state-owned and private, must use all other domestic capacity before
turning to overseas facilities. Traditionally these have included Munich Re, Swiss Re and Allianz, which
havehandledIndianCAR/EARbusinessformanyyears.
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A recent development has involved local insurers having larger retentions and an increase in the use of
coinsurance.
Distribution
BrokersanddirectconnectionsplacemostCAR/EARbusinessonanestimated50/50basis.
Building Cost Index

TheConstructionIndustryDevelopmentCouncilpublishestheConstruction Cost Indices (CCI),whichare
computedforIndia'smajorcities.TheCCIrepresentsavariationinthecostofanumberofinputsthatgo
intoconstructionworksandsincetheweightingoftheseinputs,suchasthecostofcement,steel,sand,
wood, wages and salaries and of equipment for the various sectors of the economy where construction
plays a major role is variable, the indices are computed for 11 sectors, such as roads, power, urban
infrastructureandbuildings.
InDecember2009,theCCI Construction Cost Indexforthebuildingssectorreadasfollows:
Delhi
113.98
Kolkata
111.78
Chennai
113.46
Hyderabad
111.78
Mumbai
113.46
Bangalore
109.32
Note: base 100 at October 2007
Thenationalaveragewas112.29.
Principal Contractors
The largest private contractors who specialise in industrial and commercial construction include the
following:
ECCConstruction(partofIndo-DanishGroupLarsen&Toubro,L&T)
JPAssociates
UnitechLtd
NavayugaEngineering
HyundaiEngineering
SENRO
DLF.
Thefollowingspecialiseinresidentialwork:
HiranandaniConstructions
Raheja.
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Government-ownedcompaniesintheconstructionsectorinclude:
NationalProjectsConstruction
NationalBuildingConstruction
IndiaRailwayConstruction
NationalHydroelectricProjects
NationalHighwayAuthorityofIndia.
Machinery Breakdown
Summary and Trends
India'sfourpublicnon-lifeinsurers,NewIndia,National,OrientalandUnitedIndiahavewrittenmachinery
breakdownformanyyearsbut,intheabsenceofseparatestatistics,noindicationcanbegivenastothe
volume of business or its profitability. New private insurers with foreign partners that have experience in
machinerybreakdownaremakingsteadyprogressinincreasingmarketshare.
Statistics
Therearenoseparatestatisticsformachinerybreakdowninsurance.

Machinerybreakdowninsuranceiscoveredunderaseparatepolicyexceptwhenfoundwithinanindustrial
allriskspolicy.Thelatterisbecomingmorepopularasthepremiumratesarebetter.
Althoughtariffpremiumswereabolishedfrom1January2007theInsuranceRegulatoryandDevelopment
Authority(IRDA)continuestocontrolpolicywordings.
The market offers machinery breakdown insurance for all types of industrial machinery such as
compressors,pumpsandturbinestogetherwithelectricalmachines,whichincludetransformers,electrical
motorsandgenerators.
The policy covers financial loss incurred by the insured due to loss or damage to machinery due to
accidentalelectricalandmechanicalbreakdown.Thefollowingexclusionsapply:
faultymaterial/workmanshippertainingtotheinsuredmachinery
theactionofcentrifugalforcescontributingtothedisruptionofrotatingparts
failureoflubricationduetothemalfunctioningoflubricatingoilpumps
malfunctioningorfailureofsafetydevices
electricalshortcircuitingincludingelectricalfiresoriginatingfromfailureofinsulationand/orovervoltage
orundervoltageconditions
abruptandsuddenstoppageofotherconnectedmachinery
entryofforeignbodiesintorunningmachinery
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inexperiencedoperatorscausingdamageduetoerrorsofjudgmentoroperationalerror.
Thepolicycanbeextendedtocoverthefollowingperilsuponpaymentofanadditionalpremium:
damagetothemachinery'sfoundation
damagetooilinelectricalapparatus
expressfreight(excludingairfreight),holidayratesandovertimecharges
airfreight
additional customs duty, ie the additional percentage of duty payable at the time of re-import for
replacementoverandabovethepercentageofdutyincludedintheoriginalsuminsured
own surrounding property, ie damage to the insured's own existing property or property in his or her
custody or control (not included in the sum insured of the policy) due to any damage to the machines
insuredbythepolicy
thirdpartyliability,ietheinsured'sliabilityforbodilyinjurytoathirdpartyotherthanthosecoveredbythe
policyorforpropertydamagebelongingtosuchotherparty.
The sum insured or limits for which a machine is insured should represent the present-day value of a
similarnewmachine,includingallincidentalexpenseslikecustomsduties,taxes,excise,freight,insurance
premiums, handling charges etc. In case the policy's sum insured is less than the above-mentioned
requirement,anaverageclausewillbeapplied.

In a circular dated 4 December 2006, the IRDA announced that it had decided that the rates, terms,
conditions and regulations applicable to engineering and other business currently under tariffs would be
withdrawn as from 1 January 2007. Insurers now apply premiums in accordance with their own rating
tableswhichwillhavebeenfiledandapprovedbytheIRDA.
Examplesofthedeductiblesformachinerybreakdowningeneralareasfollows.
1% of the sum insured for each machine subject to a minimum of INR 2,500 (USD 56.63). (Each
machine'ssuminsuredshouldbedeclaredasawholeandshouldnotbeapportionedtowardspartsof
themachine).
Lossofprofits:14daysofstandardgrossprofit.
Boilerinsurance:5%oftheclaimamountsubjecttoaminimumofINR10,000(USD227).
Electronicequipmentinsurance:deductibleaspertheTACtariff.
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Loss History
Nomarketlossstatisticsareavailablebutitisknownthatin2005amachinerybreakdownlossformaterial
damageandbusinessinterruption,estimatedatINR700croresorINR7.0bn(USD158.7mn)occurredat
UnitNo4oftheSutlejPowerStation.
Major Insurers
India'sfourpublicnon-lifeinsurers,NewIndia,National,OrientalandUnitedIndiahavewrittenmachinery
breakdown for many years. Private insurers such as ICICI Lombard and Reliance are likely to have a
sizableportfolioofmachinerybreakdownbusiness.
Reinsurance
Reinsuranceforthisclassisincludedintheengineeringtreaties.
Distribution
Brokersanddirectconnectionsplacemostmachinerybreakdownbusiness.
Statutory Inspection Requirements

The Central Boilers' Board of India, constituted under Section 27A of the Indian Boilers' Act 1923, is
responsibleformakingregulationsforlayingdownthestandardsformaterials,designandconstructionas
well as for the registration of and inspection of boilers. The board is permitted to appoint private
independentandqualifiedcontractorsas"inspectingauthorities".
InaccordancewithSection IIoftheBombay Lifts Act 1939itistheresponsibilityoftheMaharashtrastate
government to inspect each lift twice a year and recommend to the lift's owner the correction of faults.
Compliance with these regulations is difficult as it is understood that there are insufficient inspectors to
carryouttheworkneededtocoveranever-increasingnumberofliftsinthemajorcityinthestate,namely
Mumbai, where a building boom is resulting in the construction of more and more structures that are
equippedwithlifts.
ItisunderstoodthattherearesimilarexamplesofsuchregulationsinotherpartsofIndia.
Extended Warranty
The New Delhi-based Oriental Insurance, one of the public sector non-life insurers, offers extended
warranty insurance for new mobile telephones. Another of these insurers, National Insurance, offers a
policy that provides extended warranty to prospective buyers of vehicles over and above the normal
warrantyprovidedbythemanufacturers/authoriseddealersforcarsandtwo-wheelersforexample.
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Summary and Trends
=================================================================================
Update August 2011
Accordingtolocalpressreportsmotorinsurersarelikelytohaveincurredenormouslossesduringthe
financialyearending31March2011duetoheavyunderprovisiononmandatorythirdpartyclaims.Inorder
tohelpinsurerscovertheirlossestheInsuranceRegulatoryandDevelopmentAuthority(IRDA)proposeda
reviewofcorrespondingpremiums.InanExposure Draftdated4January2011,itsuggesteda10%
increaseinpremiumsforprivatecarsandtwo-wheelers,andupto80%forcommercialvehicles.Itis
understoodthattheIRDAinformedinsurersintheExposure Draftthat"theratesproposedarethepremium
thatcanbechargedbyinsurersuntilfurtherorders".
On15April2011,anotificationreleasedbytheIRDAintroducedspecificrateincreasesformotorthird
partyonlyinsurancewhichwereintimatedintheExposure Draftdated4January2011.Witheffectfrom25
April2011newpremiumratesweremadeapplicableandaresetoutinAnnexure 1ofthenotification.
Effective25April2011,thenewannualpremiumratesforprivatecars(notexceeding1000cc)isINR740
(USD16.74)andforprivatecarsthatexceed1000ccbutnotexceeding1500cc,itisnowINR880(USD
19.91).Goodscarryingvehicles(privatecarriers)withaGVWnotexceeding7500kgwillpayannual
premiumsofINR8,420(USD191).Thenewannualpremiumrateforfourwheeledvehiclesusedfor
carryingpassengersforhireorreward(notexceedingsixpassengersand1000cc)isnowINR2,780(USD
63).
=================================================================================
In2008-09,motorinsurancepremiumsamountedtoINR138,031.90mn(USD2,851.60mn),anincreaseof
5.68% over the previous year. The loss ratio was 84.29%. Motor premiums accounted for 41.2% of total
non-lifepremiums.
Demand for insurance grows as vehicle ownership increases steadily and the inadequacy of the road
system becomes ever more apparent. The poor claims experience can be blamed on non-technical risk
pricingandanincreaseinthirdpartyclaims.
Ownersofvehiclesareobligedtoinsureagainsttheriskofunlimitedthirdpartybodilyinjuryliability,and
third party property damage limited to INR 750,000 (USD 16,988). This can be extended to "unlimited"
coveruponpaymentofanadditionalpremium.Ownersofpublicvehiclescarryingpassengersareobliged
toinsuretheirpotentialliabilityforbodilyinjurytosuchpassengers.
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In a circular dated 4 December 2006, the IRDA announced that it had decided that the rates, terms,
conditionsandregulationsapplicabletomotor(exceptthirdpartyonlycover)andotherlinesincludingfire,
engineering, workers' compensation and other classes of business currently under tariffs would be
Revised motor insurance premium rates for third party only cover were introduced with effect from 1
January2007.
Witheffectfrom1April2007theIndianMotorThirdPartyInsurancePool,administeredbythestate-owned
reinsurancecompany,theGeneralInsuranceCorporationofIndia(GICRe)cameintooperation.Thepool
providesforthirdpartycoverwithunlimitedliabilityforcommercialvehicles.
Legislative Update
=================================================================================
Update August 2011
On15April2011,anotificationreleasedbytheInsuranceRegulatoryandDevelopmentAuthority(IRDA)
introducedspecificrateincreasesformotorthirdpartyonlyinsurancewhichwereintimatedintheExposure
Draftdated4January2011.Witheffectfrom25April2011newpremiumratesweremadeapplicableand
aresetoutinAnnexure 1ofthenotification.
=================================================================================
Therehavebeennorecentchangesinlegislationaffectingmotorinsurance.
Noprojectedlegislationaffectingmotorinsurancewasknownofwhenthisreportwasinpreparation.
Statistics
Premiumsandclaimsstatisticsforthefour-yearperiodto2009(nodataisavailablebeforethatperiod)are
asfollows:
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Statutory Third Party Limits

The Motor Vehicle Act 1988, which took effect from July of the following year, replaced the original
legislation introduced by the British administration in 1939. In accordance with the 1988 act's provisions,
ownersofvehiclesmustinsureagainsttheriskofunlimitedthirdpartybodilyinjuryliability,andthirdparty
property damage limited to INR 7.5 lakhs or INR 750,000 (USD 16,988). This can be extended to
"unlimited"coveruponpaymentofanadditionalpremium.Ownersofpublicvehiclescarryingpassengers
areobligedtoinsuretheirpotentialliabilityforbodilyinjurytosuchpassengers.
Asfarasisknown,nochangesarepending.
Whenthisreportwasinpreparation,noinformationwasavailableastowhetherthereisanymechanism
for large companies to self-insure by way of making a monetary deposit instead of buying insurance, as
can be done in the United Kingdom. It is known, however, that state governments have set up funds for
coveringtheirvehicles.
Other Regulatory Considerations

In1994,the1988actwasamendedtoimprovetheclaimssettlementprocess,asdetailedbelow.
The interim relief for "no-fault" liability for death was increased from INR 25,000 (USD 566) to INR
50,000(USD1,133)andthatforpartialtotaldisablementfromINR12,000toINR25,000(USD272to
USD566).
Finalreliefonprovablefault-basedliabilitybecameunlimited.
Anewprovisioninthe1988act(Section 163A)allowsfor"no-fault"structuredcompensationuptoINR
40,000(USD906)inthefirstinstanceandthenuptoINR800,000(USD18,120),lessone-thirdforfatal
cases,forinjuredpartieswithannualincomes.
If compensation is sought under Section 163A, a claim cannot then be made in accordance with the
provisionsofthesecondbulletpointabove.
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Itisunderstoodthatnochangesareplannedtotheregulatorylegislationforthetimebeing.
TheSolatiumFundSchemeisaschemeintroducedinaccordancewiththeprovisionsoftheMotor Vehicle
Act to provide for the payment of compensation to the victims of hit-and-run drivers. The fund pays INR
25,000(USD566)intheeventofdeathandINR12,500(USD283)forgrievousbodilyinjury.Claimsmust
besubmittedwithinsixmonthsofthedateoftheaccident.ThefundwhichismanagedbytheNewIndia
AssuranceCoisfinancedbyallnon-lifeinsurersbymeansofalevyof0.02%ofthegrosswrittenpremium
incomeofeachcompany'smotordepartment.
ThereisnobadriskpoolinIndia.
In August 2005, after receiving complaints that in some cases members of the public were unable to
arrangeinsurancefortheirvehicles,theIRDAdirectedallnon-lifeinsurerstoacceptcompulsorythirdparty
motorbusiness.Theregulatormadeitquiteclearthatthirdpartyinsuranceiscompulsoryinlinewiththe
Motor Vehicles Act 1988.Theactalsostipulatesthatinsurerscannotrejectthirdpartycoverapplicationfor
anyvehiclethathasavalidfitnesscertificate.
Asfarasisknown,nochangesareplannedforobligatorythirdpartyinsurance.
International Motor
Indianmotorpoliciesmaybeextendedtoincludeanyofthefollowing:
Bangladesh
Bhutan
Nepal
Pakistan
SriLanka
Maldives.
A flat additional premium is charged for a period not exceeding 12 months. The premium for package
policies(comprehensive)isINR500(USD11.32)pervehicleirrespectiveofitsclassandINR100(USD
2.26)pervehicleforpoliciesotherthanpackages.
MotorvehiclesfromabroadthataretravellinginIndianeedinsurancecoverfromaninsurerregisteredto
operateinIndia.

Notwithstanding the fact that tariff premiums for own damage cover (as opposed to third party) were
abolishedon1January2007,standardmotortariffwordingswillcontinueuntilfurthernotice.
Accordingtotheerstwhilemotortariff,therearetwotypesofpolicies.
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Theprivatecarpackageorcomprehensivepolicycoverslossordamagetotheinsuredvehicleandits
accessoriesduetocollision,fire,theftandavarietyofnaturalhazardsandotherspecialperils,suchas
earthquake,flood,typhoonandlandslide.Furthermoreawiderliabilitycoverthanthatcalledforbythe
1988actisincludedtogetherwithpersonalaccidentforowner-drivers.
Theliabilityonlypolicycoversthirdpartyliabilityforbodilyinjuryand/ordeathandpropertydamagewith
personalaccidentcoverforowner/drivers.
Againaccordingtothetariff,thestandardthirdpartypolicycoverslegalexpenses.
=================================================================================
Update August 2011
Accordingtolocalpressreportsmotorinsurersarelikelytohaveincurredenormouslossesduringthe
financialyearending31March2011duetoheavyunderprovisiononmandatorythirdpartyclaims.Inorder
tohelpinsurerscovertheirlossestheInsuranceRegulatoryandDevelopmentAuthority(IRDA)proposeda
reviewofcorrespondingpremiums.InanExposure Draftdated4January2011,itsuggesteda10%
increaseinpremiumsforprivatecarsandtwo-wheelers,andupto80%forcommercialvehicles.Itis
understoodthattheIRDAinformedinsurersintheExposure Draftthat"theratesproposedarethepremium
thatcanbechargedbyinsurersuntilfurtherorders".
On15April2011,anotificationreleasedbytheIRDAintroducedspecificrateincreasesformotorthird
partyonlyinsurancewhichwereintimatedintheExposure Draftdated4January2011.Witheffectfrom25
April2011newpremiumratesweremadeapplicableandaresetoutinAnnexure 1ofthenotification.
Effective25April2011,thenewannualpremiumratesforprivatecars(notexceeding1000cc)isINR740
(USD16.74)andforprivatecarsthatexceed1000ccbutnotexceeding1500cc,itisnowINR880(USD
19.91).Goodscarryingvehicles(privatecarriers)withaGVWnotexceeding7500kgwillpayannual
premiumsofINR8,420(USD191).Thenewannualpremiumrateforfourwheeledvehiclesusedfor
carryingpassengersforhireorreward(notexceedingsixpassengersand1000cc)isnowINR2,780(USD
63).
=================================================================================
TheIRDAabolishedmotorpremiumtariffson1January2007.Tariffpolicywordingsaretocontinueinuse
untilfurthernoticefromtheIRDA.
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Following the abolition of the premium tariff, insurers applied their own rates, which for third party for
commercial vehicles were between 126% and 150% higher than the old tariff. Haulage companies were
amongst the most bitter in their complaints about the increases and threatened to go on a nationwide
strike. This would have had an adverse impact on commodity prices and inflation and the minister of
financesteppedinanddirectedtheIRDAtolimitthethirdpartyincreases.On23January2007anewthird
partypremiumtariffwasissued,backdatedtothefirstofthemonth.
Someexamplesofthenewratesforprivatecarsareasfollows:
Annual fixed premium
Notexceeding1000cc
INR670(USD15)
Exceeding1000ccbutnot
exceeding1500cc
INR800(USD18)
Exceeding1500cc
INR2,500(USD57)
Thesearethestatutoryratesforunlimitedthirdpartybodilyinjury,andthirdpartypropertydamagelimited
toINR750,000(USD16,988).
InMay2010,itwasreportedinthepressthattheinsuranceindustrywascallingforanincreaseinmotor
thirdpartypremiumratesandhasformedacommitteetolookintothefeasibilityofpremiumincreases.In
themeantime,theregulator,theIRDAhasyettomakeadecisiononthequestionofderegulatingthemotor
thirdpartytariffinspiteofdemandsfrominsurers.
Premiumratingforowndamagecoverintheoldtariffwasbasedonfourfundamentalfactors:thevehicle's
declaredvalue,itscubiccapacity,thegeographicallocationofthevehicleanditsage.Ratesrangedfrom
3.039% on the declared value of a vehicle with an age not exceeding five years, a cubic capacity not
exceeding1,000anddomiciledinzoneB,to3.698%foravehicleover10yearsoldwithacubiccapacityin
excessof1,500inzoneA.Theowndamagecompulsorydeductibleforprivatecarsnotexceeding1,500cc
wasINR500(USD11)andforthoseexceeding1,500cc,INR1,000(USD23).
Thefundamentalratingfactorsunderthenewnon-tariffregime,inwhicheachinsurerappliesitsownrate
duly approved by the IRDA, have not altered very much except that "add-on" covers are now taken into
account. When this report was in preparation, it was reported that rates for own damage for private cars
couldbeatleast45%lessthanthetariff.Thecurrentratesaredescribedashighlycompetitiveandfluid.
Undertheoldtariffthegrossannualpremiumforanowndamageandliabilityinsurancefor,say,a2002
HindustanAmbassadorof1,800ccandvaluedatINR443,000(USD10,034)inNewDelhiwasasfollows:
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Owndamage
Liability
INR15,239
USD345
INR700
USD16
Discounts for voluntary deductibles and no claims, amongst other things, can be applied to the gross
premium.
Premiumratemovementssincethebaseyearof2006aresummarisedasfollows:
Motor rate movements
2009
55
2008
60
2007
80
2006(baseyear)
100
No Claims Discount System

Insurers continue to advertise discounts of 20% of the own damage premium if no claim is made or is
pendingduringthepreviousfullyearofinsurance,andprogressesthroughto50%fornoclaimsduringthe
precedingyears.Thiswasthesituationbeforetheabolitionoftheofficialpremiumtariff.
Loss Experience and Trends in Court Awards

Motor insurance accounted for 41.2% of non-life premium in 2008-09 and the majority of non-life losses.
Demand for insurance grows as vehicle ownership increases steadily and the inadequacy of the road
systembecomesevermoreapparent.Lossratiosareunsatisfactory.In2008-09,theratiowas84.29%and
aboutthesame,84.53%,inthepreviousyear.
More motor third party cases are reaching court where higher awards, currently averaging around INR
250,000 (USD 5,663) for death and permanent disability are continuing the increase in quantum
settlementsmadeoutofcourt.In2008,awardswerearoundINR100,000(USD2,299).Increasesaredue
to the fact that the public is more litigation conscious and lawyers are more energetic in seeking out
potentialclients.Majormotorinsurersreportthirdpartylossratiosof200%comparedwitharound80%for
owndamage.TheftlossesarelessofaworrybutinacountryaslargeasIndia,experiencevariesgreatly
sothattheincidenceoftheftcanbebetterinsomezonesthanothers.
Thehighestcourtawardistheoft-quotedcaseofamotoraccidentin1998whenanIndiandoctoraged45
whoworkedintheUSwaskilledinacollisionwithatruckonahighwayinIndia.Asaconsequence,his
dependants were awarded compensation of INR 12.50mn or USD 302,959 at the rate of exchange
prevailingatthattime.
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Historically the poor motor claims experience will have deteriorated even further in the 2005-06 financial
year as a result of damage caused to vehicles that were caught in the catastrophic floods in Mumbai
(Bombay)inJuly2005.Unfortunatelynomarketstatisticswereavailableatthattime.Around7,000claims
werereceivedfromflood-affectedvehicleowners.Threemonthslaterinsurerswerestillstrugglingtosettle
anenormousbacklogofclaimsestimatedtobenearlyINR2,000croresorINR20bn(USD453.51mn)in
value. Delays in settling outstanding claims occurred for a variety of reasons ranging from severe
shortagesofmotorsparepartstoplainexhaustiononthepartofinsurers'stafffacedwithsuchamassof
additionalpaperwork.
InearlyAugust2006,seriousfloodsoccurredinandaroundthecityofSurat,northofMumbai(Bombay)
following heavy rain. The Tapi River burst its banks and around 90% of the city was under 20 feet (6
metres)ofwaterand50,000vehiclesweresubmerged.
Inordertoacceleratethesettlementofmotorthirdpartyclaims,conciliationforumsknownasLokAdalat
areused.OnceagreementhasbeenreachedbetweenthepartiesindisputeinaLokAdalat,everyaward
isdeemedastheequivalentofarulingofacivilcourtandisfinalandbindingontheparties.Thereisno
appealofadecisionoftheLokAdalat.Ifnocompromisecanbeagreedaboutthematterincontentionthen
thecaseshouldbereferredtoaconventionalcourtoflaw.TheLokAdalatsystemhasbeengivenstatutory
legitimacybytheLegal Services Authorities (Amendment) Act 1994.
Major Insurers
In 2008-09, according to information from Interlink Insurance & Reinsurance Brokers Ltd, the lead motor
insurers were New India (market share 18.19%), National (16.12%), United India (11.72%), Oriental
(11.60%),ICICILombard(9.90%)andReliance(8.73%).
Reinsurance
Motorrisksareretained100%intheIndianmarket.
Distribution
Agentsaresaidtoplayasignificantroleinthedistributionofprivatemotorinsurancealthoughnostatistics
are available to confirm just what volume of premium they handle, as opposed to that generated directly
fromclients.Brokersaremorelikelytohandlefleetpoliciesforindustrialandcommercialclients.
Vehicle Statistics
AccordingtotheStatistical Outline of India 2008-09publishedbyTATAServicesLtdtheestimatednumber
ofregisteredmotorvehiclesinIndiain2004,thelatestyearforwhichdataisavailable,wasasfollows:
'000
Growth over 2003 (%)
768
6.5
Goodsvehicles
3,749
7.4
Carsandjeeps
9,451
9.9
Two-wheelers
51,922
9.2
Others
6,828
2.2
Total
72,718
2.2
Buses
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Note: others include tractors, trailers, three-wheelers (passenger vehicles) and other miscellaneous vehicles which are not separately
classified.
Privatecarsaccountfor30%oftotaltransportdemandonIndia'surbanareas.AccordingtotheNew York
Times (7 November 2007) an average of 963 new cars are registered every day in Delhi alone. The
numberofautomobilesproducedinIndiarosefrom6.3mnin2002-03to11.2mnin2008-09accordingto
the Society of Indian Automobile Manufacturers. Nevertheless overall car ownership is very low within a
populationofoverabillionpeople.
Compactcars,especiallyhatchbacks,predominateduetoaffordability,fuelefficiency,congestionandlack
ofparkingspaceinmostcities.IntheorderofmarketshareMarutiHyundaiandTATAMotorsarethemost
popular brands. These models have now overtaken the Ambassador, which, before the economy was
liberalisedinthe1990s,enjoyedavirtualmonopolyofsales.Itis,however,stillusedbytaxicompanies.
TheMaruti800,launchedin1984,setoffthefirstrevolutionintheIndianautomobilesectorbecauseofits
lowprice.Ithadthehighestmarketshareuntil2004whenitwasovertakenbyotherlow-costmodelsfrom
Maruti such as the Alto and the Wagon R, the Indica from TATA Motors and the Santro from Hyundai.
Sinceitsintroductionaround2.4millionunitsoftheMaruti800havebeensold.Withtheintroductionofthe
TATANano,theleastexpensiveproductioncarintheworld,thisachievementislikelytobesurpassed.
Motor Fleets and Commercial Vehicles

TheIRDAabolishedmotorpremiumtariffson1January2007.Tariffpolicywordingsaretocontinueuntil
furtheradvicesarereceivedfromIRDA.
The IRDA has set up the Indian Motor Third Party Insurance Pool, which came into operation on 1 April
2007.Thisprovidesthirdpartycoverwithunlimitedliabilityforcommercialvehicles.Allnon-lifeinsurance
offices participate "collectively, mandatorily and automatically in a pooling arrangement". The General
InsuranceCorporationofIndia(GICRe)administersthepoolundertheguidanceoftheGeneralInsurance
Council.
The pooling of business is achieved through a multi-lateral reinsurance arrangement between the
participatinginsurersandGICRewhoseshareistheequivalentofitsstatutoryreinsurancecessionwhich,
in 2008-09, was 10%. The balance of the share of pooled business is taken by all other pool member
insurers in the same proportion as the total gross direct premium in India of each insurer for non-life
businessforafinancialyearbearstothetotalmarketgrossdirectpremiumincomeinIndiainrespectofall
classes of non-life insurance business of all member insurers for that financial year. Pool premium rates
aredictatedbyamandatorytariff.
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Motor
AccordingtotheGICRe2008-09 Annual Report,17membercompaniesincludingGICReparticipatedin
thepoolingarrangement.Thetotalpremiumpooledfortheyearunderreview(April2008toFebruary2009,
11 months) was INR 2,822.96 crores or INR 28.23bn (USD 583.20mn). The incurred claims were INR
3,258.54croresorINR32.59bn(USD673.28mn)whichamountstoalossratioof115.44%.Becausethe
lossesarespreadthroughoutthemarketandallparticipatinginsurerstaketheirshare,theimpactwassuch
thatthepool'sunprofitabilitycontributedsignificantlytotheunprofitabilityofthenon-lifemarketaswholein
2008-09.
GICReearnsanadministrationfeeof2.5%ofpooledpremiumtocoveritsexpensesincurredinmanaging
thescheme.
Thepoolpremiumratesaremandatory.Forexample,premiumsforgoods-carryingvehicles/publiccarriers
otherthanthree-wheelersareasfollows:
notexceeding7,500kg-INR5,580(USD126)
exceeding7,500kgbutnotexceeding12,000kg-INR5,920(USD134)
exceeding40,000kg-INR6,770(USD153).
There are other premium rates for private goods carriers, goods-carrying motorised three-wheelers and
pedalcycles,bothpublicandprivate,andtrailersamongstothers.
Thechoiceofcoverforcommercialvehiclesissimilartothatforprivatecars.Anypolicyissuedinrespect
of a vehicle for the carriage of passengers for hire or reward and in respect of which legal liability to
passengers is required to be covered in terms of the Motor Vehicles Act 1988 is subject to an additional
premium.
The application of discounts to fleet premiums has been discontinued. Premium rates for commercial
vehicles(otherthanmotortraderisks)areeligibleforbonus/malusdiscountsandloadings.
Specialpremiumratesforfleetsof100ormorecommercialvehiclesareavailableuponapplicationtothe
officialTariffAdvisoryCommittee.
ThefourpubliccompaniesNewIndia,National,OrientalandUnitedIndiadominatethecommercialmotor
market. The private insurers are understood to be writing the business on a very strict accommodation
businessbasisonly.
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Summary and Trends
The Indian legislation on workers' compensation aims to provide workers and/or their dependants a
measureofreliefincaseofaccidentsand,tosomeextent,occupationaldiseasesarisingoutofandinthe
courseofemploymentandresultingineitherdeathordisablement.
Itisnotcompulsoryforanemployertoarrangeinsurancetocoveranybenefitsforwhichheorshemay
becomeliabletopayundertheprovisionsoftheworkers'compensationlaws.Asaresultofthisandthe
fact that many people are excluded from the protection afforded by workers' compensation as they are
covered by other occupational accident legislation, there is a fairly limited demand for this class of
insurance.
Expatriatesareusuallyemployedinseniorpostsandareunlikelytofallwithinthedefinitionsofa"worker"
intheprovisionsoftheworkers'compensationlaw.
Employers' liability policies, either as an extension to a general third party liability insurance or more
commonlywithcoverincludedintheWCApolicy,payallsumswhichtheinsuredislegallyliabletopaythe
employeesinrespectofpersonalaccidentordiseasesarisingoutofandinthecourseofemployment.The
insured'slegalliabilitycanariseeitheratcommonlaworinaccordancewiththeprovisionsofthelawsset
out in the schedule of the Workmen's Compensation Act 1923 and the Fatal Accidents Act of 1855 and
1885.
TheWorkmen's Compensation (Amendment) Act 2009introducedaseriesofamendmentstothe1923act
including a change of name to the Employee's Compensation Act 1923 (the EC Act) in order to ensure
genderneutrallegislationandanincreaseincertainbenefitsunderSection 4.
Statistics
Noseparatestatisticsareavailable.
Regulatory Considerations
The Workmen's Compensation Act 1923 came into force on 1 July 1924. The act applies to workers
employed in any capacity specified in Schedule II of the act which includes factories, mines, plantations,
mechanicallypropelledvehicles,constructionworkandcertainotherhazardousoccupations,andspecified
categoriesofrailwayservants.Itdoesnotapplyto:
personswhoseemploymentisofacasualnature,andwhoareemployedforapurposeotherthanthe
employer'stradeorbusiness
personsservinginthearmedservices
workers covered by the Employee's State Insurance Act 1948 (the ESI Act) which applies to all
non-seasonalfactoriesandestablishmentswith10ormoreemployees(from1June2010).Thisactalso
covers shops, hotels, restaurants and clubs, cinemas, newspaper establishments and road motor
transportestablishments.
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InaccordancewithIndiancivillaw,employershaveastatutoryandcommonlawdutyofcaretowardstheir
employees. Workers' compensation insurance encompasses employers' liability cover although some
companiesissueseparatepolicies.
Legislative Update
ParliamenthaspassedtheWorkmen's Compensation (Amendment) Act 2009,newlegislationdescribedas
an"ActfurthertoamendtheWorkmen's Compensation Act 1923."
Theamendmentsintroducedbythenewlawincludethefollowingamongstothers:
theWorkmen's Compensation Act 1923changesitsnametoEmployee's Compensation Act 1923
amendments to compensation effective from January 2010 (see under Limits of Liability below for full
details)
death-minimumcompensationpayableincreasedfromINR80,000(USD1,812)toINR120,000(USD
2,718)
totalpermanentdisablement-minimumcompensationincreasedfromINR90,000(USD2,039)toINR
140,000(USD3,171)
funeralexpensesincreasedfromINR2,500(USD57)toINR5,000(USD113)
inclusionofadditionalactivities
reimbursementofactualmedicalexpensesincurredduringtreatmentofinjurycausedduringthecourse
ofemployment.(thepreviousbenefitwaslimitedtoINR2,400(USD54))
thecentralgovernmentisempoweredtospecifymonthlywagesforthepurposesofcompensationand
increaseminimumratesofcompensationfromtimetotime.
The law stipulates a time frame within which an award has to be pronounced, for example, it is three
monthsforafiledWCpetition.
Noprojectedlegislationwasknownofwhenthisreportwasinpreparation.
Expatriates
Expatriatesareusuallyemployedinseniorpostsandareunlikelytofallwithinthedefinitionsofa"worker"
in the provisions of the workers' compensation law. As far as other "social security" legislation is
concerned, again expatriates are unlikely to qualify for the benefits payable in accordance with the
provisions of either the Employees' State Insurance Act 1948 or the Employees' Provident Funds and
Miscellaneous Provisions Act 1952,althoughvoluntarymembershipoftheprovidentfundispermitted.
Cover is available for Indian employees covered by workers' compensation even if they are temporarily
travellingoverseas.TheinsuranceisstillsubjecttoIndianlawandjurisdiction.
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Limits of Indemnity
The ESI act covers non-seasonal factories and establishments with 10 or more employees where the
manufacturingprocessusespowerorwith20ormoreemployeeswheretheprocessdoesnotusepower.
This act also covers shops, hotels, restaurants and clubs, cinemas, newspaper establishments and road
motortransportestablishments.
TheemployeescoveredarethosewithmaximummonthlyearningsofINR15,000(USD340)(INR25,000
(USD566)fordisabledemployees).
Employees who earn up to INR 15,000 (USD 340) per month and are not entitled to compensation in
accordancewiththeESIActarecoveredundertheECAct.TheWorkmen's Compensation (Amendment)
Act 2000cameintoeffecton8December2000andextendedtheschemetoincludecasual,contractorand
full-timeworkers.Italsoextendedthetypeofindustriescoveredtoallthosethatareoutsidethecoverof
theESIAct.
ItisnotpossibletoclaimunderboththeESIActandtheECAct.
UnderthetermsoftheESIActbenefitsarepayabletoorinrespectofanemployeewhodiesorisinjured
in the course of employment and is permanently or temporarily disabled, or contracts any occupational
disease.
ESIActbenefitsareprimarilypayableasincomebenefitsasfollows.
Survivor's benefits - The maximum total benefit payable is equivalent to the permanent disablement
benefitandisallocatedasfollows:
thewidowreceives60%ofthetotalbenefit,payableduringlifeoruntilremarriage;iftherearetwoor
morewidows,theamountpayableisdividedequallybetweenthewidows
eachlegitimateoradoptedsonreceives40%ofthetotalbenefit,payableuntilage18
alumpsumfuneralgrantofINR5,000(USD113)isalsopayable
Permanent disablement benefit - The maximum benefit payable is 150% of the standard benefit rate
which is broadly 75% (not less) of average daily wages; the actual amount paid is dependent on the
assessedlossofearningscapacity.Thebenefitispayableforlifeifincapacitylastsandrangesfroma
minimumofINR21.00(USD0.48)perdaytoamaximumofINR292.50(USD6.63)perdaydepending
ontheemployee'swages.
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Temporary disablement benefit - The benefit payable is 150% of the standard benefit rate, which is
broadly75%(notless)ofaveragedailywages.Thebenefitispayablewhilstincapacitylastsorturnsto
permanent disablement and is a minimum of INR 21.00 (USD 0.48) per day and a maximum of INR
292.50(USD6.63)perdaydependingontheemployee'swages;nobenefitispayableifthetemporary
disablementlastsforlessthanthreedaysexcludingthedayofaccident.
BenefitsundertheESIActmaynotbecombined,andanemployeecanthereforeonlyreceiveoneofthe
followingbenefitsatanyonetime:sicknessbenefit,temporarydisablementbenefitormaternitybenefit.
EffectiveJanuary2010,themonthlywageceilingundertheECActwasincreasedfromINR4,000toINR
8,000.
CurrentECActcompensationlimitsareasfollows.
death-alumpsumof50%ofmonthlywagemultipliedbyrelevantagefactorsubjecttoaminimumof
INR 120,000 (USD 2,718) and a maximum of INR 914,160 (USD 20,706). Under item 7. (d) of the
Workmen's Compensation (Amendment) Act 2009,thefuneralgrantwasincreasedtoINR5,000(USD
113).
total permanent disablement-alumpsumof60%ofmonthlywagemultipliedbyrelevantagefactor
subjecttoaminimumofINR140,000(USD3,171)andamaximumofINR1,096,922(USD24,845).
partial permanent disablement - such percentage of the compensation payable in total permanent
disablementasisthepercentageoflossofearningcapacity(specifiedinSchedule 1ofthe1995 Act)
temporary disablement (whether total or partial) - a half-monthly instalment equal to 25% of the
monthlywages,fortheperiodofdisablementorfiveyears,whicheverisless.
Scope of Cover
Essentially the WCA policy covers an employer's legal obligation to pay his or her workers for death or
disablementarisingoutofoccupationalaccidentsanddiseaseasdefinedintheWorkmen's Compensation
Act 1923andasamendedbythe2009act.Employersareobligedtoprovideoccupationalinjury/sickness
benefitstoworkersinindustriesasdefinedinthelegislation.
The employers' liability cover pays all sums which the insured is legally liable to pay the employees in
respect of personal accident or diseases arising out of and in the course of employment. The insured's
legalliabilitycanariseeitheratcommonlaworinaccordancewiththeprovisionsofthelawssetoutinthe
scheduleoftheWorkmen's Compensation Act 1923 (now called the Employee's Compensation Act 1923)
andtheFatal Accidents Act of 1855 and 1885.
Costsorexpensesincurredbytheinsuredwiththeconsentofthecompanyinordertodefendanyclaim
arealsocovered.
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Rating
In a circular dated 4 December 2006, the Insurance Regulatory and Development Authority (IRDA)
announced that it had decided that the rates, terms, conditions and regulations applicable to workers'
compensationandotherclassesofbusinesscurrentlyundertariffswouldbewithdrawnasfrom1January
2007. Since then insurers have filed their own tariffs with the IRDA. Examples of their rates were
unavailablewhenthisreportwasinpreparation.
Thepreviousworkers'compensationtariffratingwasasfollows():
Clericalworkers
2.45
Builders
36.00
Chemicalworkers
18.50
Cementworkers
42.80
Stevedores
97.30
ThetariffsaidthatthepremiummustbecalculatedatthebookrateonthetotalearningsuptoINR12,000
(USD272)perannumandfortheexcessamountthepremiumshouldbecalculatedat61.4%ofthebook
ratesubjecttoaminimumrateofINR2perannumorifnotengagedinmanuallabourandprovidedall
suchemployeeswereincluded,ataminimumrateof1.20perannum.
Insurers are likely to increase their rates in the light of increased exposure prompted by the amended
benefitsintroducedbytheWorkmen's Compensation (Amendment) Act 2009.
Loss Experience
Claimsstatisticsforworkers'compensationinsuranceareunavailablealthoughpractitionersmaintainthat
market-widethisclassofbusinessisprofitable.
Major Insurers
Allfourstate-ownednon-lifeinsurerswriteworkers'compensationinsurancealthoughtheircorresponding
premiumincomesareunknown.Theextenttowhichprivateinsurersareinvolvedisunclear.
Reinsurance
Workers' compensation is retained in India and is subject to the obligatory cessions to the General
InsuranceCorporation(GICRe),themarket'ssoleprofessionalreinsurer.
Distribution
Agentsareunderstoodtobetheprincipaldistributionchannelforworkers'compensation.
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Liability
General Third Party
Summary and Trends
Marketstatisticscoveringallliabilityclassesshowanincreaseof9.03%in2008-09followingupononeof
13.14%inthepreviousyear.Thisreflectsanappreciationamongstplayersintheindustrialandcommercial
sectors that the public is gradually becoming more litigation conscious. Those living in large urban areas
such as Mumbai (Bombay) or Kolkata (Calcutta) are more likely to seek redress at law for injuries or
damagesufferedthanthosewholiveinprovincialareas,butmanyaredeterredfromtakingactionbecause
ofthelengthoftimeittakestogothroughthelegalprocess.
Total premium revenue for all liability classes in 2008-09 was INR 6,714.80mn (USD 138.72mn) and
growing.Claimsremainlowinspiteofthelessonslearntbyboththebusinesscommunityandthepublicin
the 26 years that have passed since the notorious Bhopal disaster in December 1984, when a leak of
poisonous gases from a chemical plant resulted in 3,000 dead or missing and massive liability claims
encouragedbythepublicoutcryathomeandabroad.In2008-09,theoverallliabilitylossratiowas39.1%
The Bhopal disaster and other less serious accidents of a similar nature prompted the government to
introducelegislationimposingstrictliabilityforthirdpartybodilyinjuryandmaterialdamagearisingoutof
themanufactureoruseofhazardousmaterials.TheEnvironmental Pollution Act 1986imposedliabilityon
thosethatcausepollutionoftheair,waterorland.Amorefocusedpieceoflegislation,thePublic Liabilities
Insurance Act,followedin1991.
Legislative Update
Therehavebeennorecentchangesinlegislationaffectingliability.
In January 2010, the press reported that the IRDA is looking into the possibility of introducing cover for
nuclear accidents. The issue is being studied as India is expected to be a major player in the nuclear
energy sector following the signing of an Indo-US nuclear agreement in 2008. The IRDA is talking to
insurerstoseewhetherinsurancecanbeprovidedforliabilitiesarisingoutofnuclearaccidentsthroughthe
formationofamarketpool,albeitwithgovernmentfinancialbacking.
Statistics
ThefollowingstatisticsfurnishedbyInterlinkInsurance&ReinsuranceBrokersPvtLtdapplytoallclasses
ofliabilityinsurancementionedinthischapterandcoverthethree-yearperiodto2009.
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Liability

Asliabilitywasnotanon-lifetariffclass,insurershavebeenabletousetheirownwordingsafterfilingthem
withtheregulator.Classessuchasproperty,engineering,workers'compensationandmotorweresubject
to tariffs and, whilst the premium rating part of the tariff has been abolished in all cases, insurers are
required to continue with the standard wordings until further notice, subject to a few relaxations that are
explainedinfullintheInsurancePoliciessectionofthisreport.
One typical non-tariff general liability wording covers the insured's legal liability to third parties for
accidentaldeath,bodilyinjuryordiseaseandlossordamagetoproperty.Coveralsoincludeslegalcosts
andexpensesincurredwiththepriorconsentoftheinsurerandwithinthelimitofindemnity.Dependingon
theexposure,limitsofliabilityarefixedforanyoneaccidentandduringanyoneyear.
Policiescancontainalocalorworldwidejurisdictionclause.
The policy does not include cover for product liability, personal injuries such as libel, slander, fines and
penalties,punitiveorexemplarydamagesandthetransportationofmaterials.
Typicalextensionstothebasiccoverincludeindustrialseepage,pollutionandcontamination,thecarriage
ofeffluentsoutsidethepremises,thetransportandtechnicalcollaboratorsextensions,actsofGodanda
perilsextension.

Typicalpremiumsininsurers'owntariffsarelikelytobecalculatedonthebasisofthecorrespondingrisk
group,thelimitsofindemnityselected,theratiobetweenthe"anyoneaccident"and"anyoneyear"limits,
thenumberoflocationsandtheturnover.
A typical policy is subject to a compulsory excess of 0.5% of the "any one accident" limit subject to a
maximum of INR 300,000 (USD 6,795) and a minimum of INR 2,000 (USD 45.30). These are conditions
inherited from the old liability market agreements. Higher voluntary excesses qualify for discounts on the
premiums.
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Liability
Loss Experience
Althoughnoseparateclaimsfiguresareavailableforgeneralthirdpartyasopposedtoliabilityasawhole,
theclassissaidtobeprofitable.Overalltheliabilitylossratioin2008-09was39.1%.
Themajorityofclaimsdonotreachthecourtsandthusitisdifficulttoidentifytrendsinawardsalthough
thereisanecdotalevidenceofagradualupwardsmovement.
InsurersaresaidtotakethelimitslaiddowninthePublic Liabilities Insurance Act 1991asyardsticksfor

calculatingout-of-courtsettlementsevenifcasesdonotinvolvehazardoussubstances.
CommentsontrendsinawardsetcmaybefoundintheLegalSystemsectionofthisreport.
Major Insurers
In accordance with market statistics prepared by Interlink Insurance & Reinsurance Brokers Pvt Ltd, the
majorliabilityinsurersin2008-09,withmarketshare,wereasfollows:
NewIndia
28.95%
TATAAIG
16.06%
UnitedIndia
13.21%
Oriental
12.88%
National
7.72%
Reliance
3.80%
Note: these statistics cover all classes of liability. There is no breakdown between sub-classes.
Reinsurance
GICnolongercarriestheexcessoflossprotectionuptoINR900mn(USD20.39mn)forliability.Insurers
havearrangedadequatereinsurancefortheirmiscellaneousaccount.
Thereisa10%compulsorycessiontoGICRe.
Facultativereinsuranceisunderstoodtobecommon.
Distribution
Most corporate third party business is still likely to be written on a direct basis although brokers are
increasingtheirmarketshare.
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Liability
Product Liability
Summary and Trends
Agrowthinthemanufactureandexportofanumberofproductsthatareespeciallysusceptibletoliability
claims has prompted an increase in this business. These products include pharmaceuticals,
petrochemicals,tyresandfertilisers.Theincreaseinliabilitybusinesshascoincidedwithaperiodinwhich
reinsurancetreatyprotectionfortheNorthAmericanexposurehasbeenrestricted.Thereisnowaneedfor
facultativereinsuranceforproductcoversintheUnitedStatesandCanadaarrangedbyIndianexporters.
SomeNorthAmericanimporters,especiallythoseintheretailsector,arrangetheirowninsuranceinstead
of depending upon the Indian exporter: these importers are said to find the Indian product cover too
restricted.
Legislative Update
Therehavebeennorecentchangesinlegislationaffectingproductliability.
Noprojectedlegislationaffectingproductliabilitywasknownofwhenthisreportwasinpreparation.
Statistics
The statistics shown above under the section entitled "general third party" cover all classes of liability
insurancementionedinthischapterofthereport.

Atypicalinsuranceclauseforproductliabilityreadsassetoutbelow.
"The Company will, subject to the terms exceptions and conditions of this policy, indemnify the insured
againstallsums,whichtheinsuredshallbecomelegallyliabletopayasdamagesinrespectof:
accidentalbodilyinjury(includingdeathordisease)toanyperson
accidentallossofordamagetoproperty
happeninganywhereintheworldelsewherethanatthepremisesownedoroccupiedbytheinsuredduring
theperiodofinsuranceandcausedbyanygoodssold,supplied,repaired,altered,treatedorservicedfrom
orinIndiainconnectionwiththebusiness."
Thepolicyisissuedwithinternationallyacceptablecertificatesofinsurance.
In March 2007 it was reported that the US-style commercial general liability (CGL) wordings were
becomingmorepopularamongstwhatweredescribedas"morediscerningclients".
Covercanbearrangedonanoccurrenceorclaimsmadebasis.
Policiesmaycarryalocaljurisdictionclauseoroneissuedonaworldwidebasis.TheIndianlegalsystemis
unfamiliarwithpunitivedamages.
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Liability
The rating depends on the insured's turnover and takes into account the destination of the goods to be
insuredandwhetherthejurisdictionistobeworldwideorrestrictedtoIndia.
Loss Experience
Itisunderstoodthatproductliabilitylossexperienceissatisfactory.
CommentsongeneraltrendsinawardsforliabilitymaybefoundintheLegalSystemsectionofthisreport.
Major Insurers
Thereisnobreakdownofstatisticsforthesub-classesofliabilityincludingproducts.AccordingtoInterlink
Insurance & Reinsurance Brokers Pvt Ltd, however, the overall liability ranking with market share, in
2008-09,wasasfollows:
NewIndia
28.95%
TATAAIG
16.06%
UnitedIndia
13.21%
Oriental
12.88%
National
7.72%
Reliance
3.80%
MarketpractitionersestimatethatTATAAIGistheleadcompanyforproducts.
Reinsurance
Arrangementsaresimilartothoseforgeneralliability.MosttreatiesrestrictexportstoNorthAmericaexcept
thosearrangedbylocalinsurerswithUSshareholders.
GICReprovideslimitedcapacityforexportstotheUSandCanada.
Distribution
Most corporate third party product business is still likely to be written on a direct basis although by now
brokerstoomayhaveasignificantshareofthemarket.
Territorial Limits
Exports can be covered but in the case of those to North America facultative reinsurance support is
necessaryiftheIndianexporterarrangestheinsuranceratherthantheNorthAmericanimporter.Policies
canbeextendedtoembraceNorthAmericanjurisdiction.Thismeansthatadditionalindemnityisprovided
foranyjudgment,awardorsettlementmadewithincountrieswhichoperateunderthelawsoftheUnited
StatesandCanada.
Special Risks
WhilsthighexposuressuchaspharmaceuticalmanufacturinganddistributionarecommoninIndia,thereis
littlecorrespondingactivityforanimalfeedstuffandasbestosproducts,forexample.
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Liability
Product Guarantee, Recall and Malicious Product Tamper
TheresponsetoenquiriesinthemarketinMay2010suggestedthatthedemandforproductguaranteeis
takingoff,particularlyfromautomobilemanufacturersandpharmaceuticalcompanies.
Cover is granted to selected clients for product recall and tamper subject to the availability of facultative
reinsurance.
Professional Indemnity
Summary and Trends
It is understood that demand for professional liability is growing steadily, particularly amongst doctors. A
typicalpolicylimitisINR1mn(USD22,650)anyoneperiodofinsurance.
Private insurers look upon professional indemnity as one of a number of niche markets, which they can
exploit with profit. A lack of sufficiently detailed statistics, however, means that it is difficult to gauge the
amountofprogressmadesofar.
Brokers) Regulations 2002,directandreinsurancebrokersareobligedtotakeoutprofessionalindemnity
insurance.
The regulations of the Securities and Exchange Board of India (SEBI) oblige all stockbrokers to arrange
professionalindemnityinsurance.
Legislative Update
Therehavebeennorecentchangesinlegislationaffectingprofessionalindemnityinsurance.
Noprojectedlegislationaffectingprofessionalindemnityinsurancewasknownofwhenthisreportwasin
preparation.
Statistics

The typical policy covers everything which the insured professional becomes legally liable to pay as
damages to third parties in respect of any error and/or omissions on his or her part committed whilst
rendering professional service. Legal costs and expenses incurred in defence of the case, with the prior
approvaloftheinsurer,arealsopayable,subjecttotheoveralllimitofindemnitythatisselected.
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Liability
Oneprivateinsurerofferscustomisedpoliciesforinformationtechnologycompanies,callcentres,financial
institutionsandlawfirmsamongstothers.
Policies also cover liability arising out of professional errors and omissions, and dishonesty of principals,
lossofdocumentsandinnocentnon-disclosure.WhetherlocalpoliciesfollowtheLondonmarketpracticeof
coveringthelossofpartners'fee-earningtimeresultingfromtheneedtodefendclaimsagainstthepractice
isnotclear.
Whenthisreportwasinpreparation,noinformationabouttypicallimitsofliabilitywereavailable.
Policiescancarryalocaljurisdictionclauseoroneissuedonaworldwidebasis.TheIndianlegalsystemis
unfamiliarwithpunitivedamages.

PremiumratesintariffsapprovedbytheInsuranceRegulatoryandDevelopmentAuthority(IRDA)arelikely
to be based on the professional risk group ie doctor, lawyer etc, the limits of indemnity selected and the
ratiobetweenthe"anyoneaccident"andthe"anyoneyear"limits.
A typical policy is subject to a compulsory excess of 0.5% of the "any one accident" limit subject to a
maximum of INR 300,000 (USD 6,795) and a minimum of INR 2,000 (USD 45.30). These are conditions
inherited from the old liability market agreements. Higher voluntary excesses qualify for discounts on the
premiums.
Loss Experience
No information about loss experience for professional indemnity was available when this report was in
preparation.
CommentsontrendsinawardsmaybefoundintheLegalSystemsectionofthisreport.
Major Insurers
There is no breakdown of statistics for the sub-classes of liability including professional indemnity.
According to Interlink Insurance & Reinsurance Brokers Pvt Ltd however, the overall liability ranking with
marketshare,in2008-09,wasasfollows:
NewIndia
28.95%
TATAAIG
16.06%
UnitedIndia
13.21%
Oriental
12.88%
National
7.72%
Reliance
3.80%
Reinsurance
Arrangementsaresimilartothoseforgeneralliability.
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Liability
Distribution
Brokersaresaidtobeacquiringanincreasinglysignificantshareofthemarket.
Professions
Brokers) Regulations 2002,directandreinsurancebrokersareobligedtotakeoutprofessionalindemnity
insuranceasfollows:
Category of broker
Level of professional indemnity

cover
Directbroker
minimumlimitofINR5.00mn
Reinsurancebroker
Compositebroker
Compositebrokersarelicensedtohandlebothdirectandreinsurancebusiness.
Initscircularof30September2002addressedtothecountry'smutualfunds,theSEBIreiteratedtheneed
formutualfundmanagerstoarrangeinsurancecoveragainstthirdpartylossesarisingfromfinancialerrors
andomissions.Thelevelandtypeofcoverisdeterminedbythefunds'trustees,subjecttoaminimumlevel
of INR 5 crores or INR 50mn (USD 1.13mn). Funds with assets of less than INR 100 crores or INR 1bn
(USD22.65mn),however,maytakeoutinsurancecoverforanamountoflessthanINR5croresorINR
50mn(USD1.13mn)asdeterminedbythetrustees.
AccordingtotheregulationsoftheSEBI,itisobligatoryforstockbrokerstohaveaminimumprofessional
indemnityinsuranceofINR5lakhsorINR500,000(USD11,325).
Medical malpractice claims continue to increase. Although individual doctors are taking out professional
liability insurance, it seems that so far no cover has been arranged on an affinity group or association
basis, even though cover is granted in such a way and group discounts are permitted within the market
agreementonpremiums.Somehospitals,however,areknowntohavearrangedinsurancetoembracethe
potentialliabilityofalltheirprofessionalstaffincludingdoctors.
Accountants,architectsandlawyersalsoarrangeprofessionalliabilityinsurancealthoughtoamuchlesser
extent.
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Liability
Directors' and Officers' Liability
Summary and Trends
IndiaisoneoftheAsianmarketsthatisbenefitingmostfromanincreasedinterestindirectors'andofficers'
(D&O) insurance as the need for good corporate governance grows. Amongst other things, a number of
Indian companies have made acquisitions in the US and Europe and this has led to increased D&O
exposuresandagrowingawarenessoftheneedtoarrangeadequateinsurancebothinsideandoutside
India. Estimated data from the Indian Brand Equity Foundation (Ministry of Commerce and Industry)
suggests that foreign acquisition by Indian companies topped USD 95bn in 2008-09. The US Securities
and Exchange Commission demands that the executives of Indian corporations that are quoted on US
stockexchangesorraisecapitalintheUS,musttakeoutD&Ocover.
AccordingtoaleadingbrokerwithUSconnections,theestimatednumberofD&Opolicieshasgrownfrom
between400and600in2006-07to1,500and1,800in2008-09.D&Ogrosspremiumisestimatedtohave
grownfrombetweenUSD12mnandUSD14mntobetweenUSD16mnandUSD18mnduringthesame
period.
Company Law
The risk of legal actions against company directors and officers for negligent acts and omissions is
particularly significant following acquisition and merger activities and company liquidations and employee
actionsarisefrequentlyasaresultofunfairdismissal.Directors'responsibilitiesaresetoutinaseriesof
statutesincludingtheCompanies Act 1956,theSecurities and Exchange Board of India Act 1992andthe
Foreign Exchange Management Act 1999amongstothers.Reportsoncorporategovernancesuchasthe
Kumaramangalam Birla Report 1999, the Narayana Murthy Report 2003 and Clause 49 of the listing
agreementwithstockexchangesetcstipulatedthebreadthandscopeofboardlevelresponsibilitiesmore
clearlythaneverbefore.
TheCompanies Bill 2008proposedthatcorporationswillhavetoinformtheRegistrarofCompanies(RoC)
when a director resigns from the board and when the resignation is accepted. This would help in
determining the date from which the director's liability ceases, something that at the present time can be
ambiguousandcausesproblems.
Thepremiumisnormallypaidbythecompany.

AfairlycommoncoverbasedoriginallyonLondonfacultativereinsurancewordingsprovidesinsurancefor
directors and officers of a company in the event of a negligent act or omission being carried out or a
misstatementormisleadingstatementbeingmade.Directorsandofficersareexposedtopersonalliability
asaresultoftheiractsorfailuretoactwithrespecttothecompany'sbusinessinterests.Theseliabilities
stemfromstatutes,regulations,commonlawandcaselaw.
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Liability
ProspectusliabilitycanbeaddedtothebasicD&Opolicyorcoveredbyaseparatepolicy.
Limits of indemnity normally range from INR 10 to INR 25 crores or INR 100mn to INR 250mn (USD
2.27mntoUSD5.66mn).
It is understood that TATA AIG was the first to introduce D&O into the Indian market in 2001 with the
provisionofapolicywithalimitofindemnityofuptoUSD50mn.ThiswasfollowedbyHDFCChubb(now
HDFCErgo),whichintroducedapolicywithlimitsofuptoINR450mn(USD10.19mn)from1April2005.
Marketpractitionersarereportingthatatpresent,thedemandfromclientsisforlimitsofaroundUSD3mn
toUSD6mn,althoughitisnotuncommonforrequestsforlimitsaboveUSD10mn.

Thepremiumdependsupontheprofileoftheclient,thelimitofindemnity,thepresentandpastoperationof
thecompanyandinformationinthebalancesheetandtheannualreportasawhole.
Loss Experience
Market sources report that in 2008-09 the number of D&O claims increased three-fold due to two class
actionsuits(thoughfiledabroad)forIndiancompanies.
One of these cases was that associated with the Indian-based software and outsourcing giant Satyam
Computer Services Ltd. In early 2009, the company's founder and former chairman B Ramalinga Raju
confessed to a USD 1.00bn fraud. Insurers led by TATA AIG have resisted claims presented by Satyam
underaD&OpolicyunderstoodtohavealimitofUSD75mn.
Major Insurers
The D&O market is dominated by TATA AIG and HDFC Ergo. Bajaj Alliance is making good progress in
increasingmarketshare.
Reinsurance
In the case of the market leader, TATA AIG, it is likely that it has made the necessary reinsurance
arrangementsthroughChartis'worldwidefacilities.
Distribution
Brokersareacquiringanincreasinglysignificantshareofthemarket.
Pollution and Environmental Liability

Summary and Trends
The Bhopal disaster concentrated the minds of the Indian government and the public on pollution and
environmentalissues.
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Liability
Much "green" legislation is now in place in addition to the Environmental Pollution Act and the Public
Liabilities Insurance Act to which reference has been made already. As is all too common in India,
however,itisonethingtoplacelawsonthestatutebookbutanentirelydifferentmattertofollowthemup.
A graphic example of this is the regulation concerning vehicle exhaust, which provides for checks on
emissions.Thesearehardlyevercarriedout.ThuscitystreetsinIndiacontinuetobeamongstthemost
polluted in the world. Indeed as a result of apparent government indifference, the supreme court is
increasinglyissuingdirectivestocompelcompliancewithanti-pollutionlegislation.
Fromaninsurancepointofviewdemandforpollutionandenvironmentalcoverislimited.Potentialinsureds
donotfeelthreatenedbytheriskofbeingsuedforcausingdamagebycontaminationoftheenvironment.
Althoughcontaminationoftheatmosphere,waterandthegroundisagreatproblem,theIndianpublicis
seeminglyreluctanttoclaimagainsttoomanyoftheperpetrators.Thismaybedueinparttothefactthat
nobodywishestoscareoffinvestors,especiallymultinationals:theBhopaldisasterwas24yearsago,and
publicindignationaboutresponsibilityfortheaccidenthasfadedsomewhat.
The situation may well change as a result of the government instituting regulations such as those
associatedwiththeEnvironmentalProtectionAgencyandtheNationalGreenTribunalwhichwillhavethe
same powers as civil courts to redress environmental disputes. According to press reports regarding this
development,corporationswanttoplaysafeandoptforanappropriateinsurancepolicy.
Legislative Update
TheNational Green Tribunal Bill 2009wastabledintheRajyaSabha(UpperHouseofparliament)on15
March2010.ThebillwaspassedbytheIndianparliamenton6May2010.
The Indian Minister of State for Environment and Forests, Jairam Ramesh, was reported in the press to
have said that the tribunal would act as a check on industrial pollution and aggrieved persons would be
abletoapproachthetribunaltoclaimcivildamagesfornon-implementationofenvironmentallaws.
"We will have a National Green Tribunal where any aggrieved citizen of India can go and claim civil
damages for non-implementation of (environmental) laws. That would act as a serious check on industry
andthepeoplewhoareresponsibleformeetingtheseregulations,"saidMrRamesh.
No projected legislation affecting pollution and environmental liability insurance was known of when this
reportwasinpreparation.
Statistics
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Liability
TATA AIG has what it describes as a "pollution legal liability select policy" which is written on a claims
madebasis.Theclienthastheopportunityofchoosingfromuptoninedifferenttypesofcoverwithinthe
policy, ranging from third party claims for on-site clean-up from pre-existing conditions or new conditions
throughtothirdpartyclaimsforoff-sitebodilyinjuryandpropertydamage.Businessinterruptioncoverage
is also available together with legal expenses and defence. Limits of indemnity are given on a policy
aggregateandeachlimitbasis.Underwritersimposedeductiblesthatreflectthenatureoftheexposure.
A public liability insurance act policy is available in the market. This covers the statutory liability of the
insuredarisingoutofaccidentsoccurringduringthecurrencyofthepolicyduetothehandlingofhazardous
substancesasstipulatedinthePublic Liability Insurance Act 1991andtherulesframedthereafter.
The notorious Bhopal disaster of 1984 and other less serious accidents of a similar nature prompted the
governmenttointroducelegislationimposingstrictliabilityforthirdpartybodilyinjuryandmaterialdamage
arising out of the manufacture or use of hazardous materials. The Environmental Pollution Act 1986
imposedliabilityonthosethatcausepollutionoftheair,waterorland.Amorefocusedpieceoflegislation
followedin1991,thePublic Liabilities Insurance Act.
InanticipationoftheintroductionofaNationalGreenTribunalwithpowerssimilartoacivilcourttoredress
environmental disputes, TATA AIG and ICICI Lombard are introducing new policies with wider cover to
satisfy an increase in demand for insurance from companies who want to play it safe in the light of a
tougherregulatoryenvironment.

Whenthisreportwasinpreparationnoinformationwasavailable.
Loss Experience
The Indian pollution and environmental laws have been notoriously lax in penalising industrial polluters the 1984 Bhopal tragedy in which a toxic leak from a Union Carbide India plant caused thousands of
deathsbeingacaseinpoint-andthereforeinsuranceclaimshavebeenrelativelyuncommon.
IftheGreenTribunaloperatesasitisintended,theclaimssituationislikelytodeteriorate.
Major Insurers
There is no breakdown of statistics for the sub-classes of liability including pollution and environmental
liability. According to Interlink Insurance & Reinsurance Brokers Pvt Ltd, however, the overall liability
rankingwithmarketshare,in2008-09,wasasfollows:
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Liability
NewIndia
28.95%
TATAAIG
16.06%
UnitedIndia
13.21%
Oriental
12.88%
National
7.72%
Reliance
3.80%
Reinsurance
Distribution
Brokersareincreasinglyimportantasachannelofdistribution.
Exposure
ChemicalmanufacturingrisksarestillviewedwithapprehensioninspiteofmeasurestakensinceBhopalto
introduceplantsafetymeasures.BothriverandgroundwaterpollutionarenotableexposuresinIndia.
Tanneriesareapoorpollutionrisk.OneofthefewoccasionswhenIndiancompanieswereunabletoavoid
beingpenalisedforpollutingtheenvironmentoccurredin2001,whenanumberoftanneriesinVellore,in
Tamil Nadu had to pay 29,193 families owning 15,164 hectares of agricultural land, a total of INR 26.82
croresorINR268mn(USD5.68mn)bywayofdamages.
Financial and Professional Risks

Summary and Trends
There do not appear to be any trends towards the identification and coverage of newer exposures with
moretraditionalones,forexample,D&O,fidelityandE&Owithsuchexposuresase-commerce,intellectual
property,mergersandacquisitions,patentinfringement,outsourcingrisks,andkidnapandransom.
Special contingency insurances are available in the Indian market for the cancellation of sports events,
concerts,beautycontestsandthelike.
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Summary and Trends
Inspiteofhighrates,banksmaywriteamajorityoftheconstructionandmiscellaneousbondsbusinessas
theirclaimssettlementserviceissaidtobemoreefficient.Therearecomplaintsfromsomesectorsofthe
constructionindustrythatthecoverprovidedbysomebondsistoorestrictedandhinderstheirattemptsto
securefinanceforprojects.
The specialist public sector company, the Export Credit Guarantee Corporation of India (ECGC) writes
exportcreditinsurance.Otherinsurers,suchasthepublicsectorcompanyNewIndia,theleadingnon-life
companyandtheprincipalprivateoffice,ICICILombardGeneralInsuranceCo,alsohandlethebusiness.
Statistics
Therearenomarket-widestatistics.
Construction/Other Bonds
Themarketoffersitssmallclientelethefollowingtypesofbonds:
Construction bonds
Miscellaneous bonds
Performance
Supplycontractbonds
Earnestmoney(bidbonds)
Defectliabilitybonds
Securityofcontractor'sdeposits
Retentionmoney
Courtbonds(administration)
Electricitysupplyperformancebonds
Advancepayment
Insurers charge around 1.5% in all cases on the amount of the bond in contrast to the bank's 2.5%.
Besidesthebanks'betterclaimssettlementrecord,theirpositionissecurerinthebondmarketduetothe
factthattheyactascounter-guarantorsforbondsissuedbyinsurancecompanies.
Export Credit
exportersbutdoesnothandledomesticcredit.CompositeofficessuchasNewIndia,ICICILombardand
TATAAIGalsowritesomebusiness.
ThegovernmentsetuptheECGCin1957toprovideexportcreditinsurancesupporttoIndianexporters
andithasgrownsteadilysincethen.Thecorporation'spremiumincomein2009-10(the12monthsto31
March2010)wasINR813croresorINR8.13bn(USD184mn)fromINR744.68croresorINR7.44bn(USD
153.7mn)in2008-09,anincreaseof9.2%.
ECGCissuesthecategoriesofcoverdescribedbelow.
Thestandardpolicyisissuedtoexporterstoprotectthemagainstpaymentrisksrelatedtoexportson
short-term credit and a small exporters' policy is issued for the same purpose to exporters with a
reducedvolumeofbusiness.
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Specific policies designed to protect Indian businesses against payment risks involved in a) export on
deferredtermsofpayment,b)servicesrenderedtoforeignpartiesandc)constructionworksandturnkey
projectsundertakenabroad.
Financial guarantees issued to banks in India to protect them from risks of loss involved in their
extendingfinancialsupporttoexportersatthepre-shipmentaswellaspost-shipmentstages.
ECGC also writes the political risk, for which it has a risk management department to grade country
exposures.
Wheneverbanks,includingtheExport-ImportBankofIndia,areinvolvedinfinancingexports,theyare
eligibleforECGCguarantees.Theseguaranteesarealsoavailablewhenbanksandfinancialinstitutions
lend directly to buyers or financial institutions in other countries for the purpose of promoting Indian
capitalequipmentexports.Forcreditworthycompanies,ECGCcoverisnotaprerequisiteforobtaining
exportfinance.
InplaceswhereECGChasnoofficeofitsownitdependsonagentstodistributeitsproducts.Therate
ofcommissionpaidtointermediariesis15%.
Domestic Trade Credit

TATAAIGisknowntowritethisbusiness.
Mortgage Indemnity Insurance

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Summary and Trends
The 2008-09 market statistics suggest that marine, aviation and transit (MAT) premiums accounted for a
6.1%shareoftotalnon-lifepremiums:thisindicatesasteadydeclinesince1997whenthesharewas14%.
Indian-registered vessels are insured locally resulting in a sizeable hull market in which domestic
practitioners apply their own premiums. Only in the case of larger or specialist risks would reference be
madetoothermarkets,usuallyLondon,forrating.Themarinehullandwarriskstariffswereabolishedon1
April2005.During2008-09,premiumvolumefortheclassgrewbyamodest4.8%.
Cargo business is said still to generate a greater volume of premium than other MAT classes in spite of
rate reductions brought about by fierce competition between insurers. In 2008, however, market
practitioners were reporting some stability in rates although few specific increases had been observed.
Overallpremiumincomefortheclassgrewby12.1%during2008-09.
India's aviation business is booming. With low-cost airlines joining the industry, the corresponding
insurancepremiumvolumeisestimatedtohavegoneupconsiderablyalthoughnoseparatestatisticsare
availabletosupportthisview.Anincreasingnumberofbothpublicandprivateinsurersarenowwritingthe
business of such airlines. A significant breakthrough was made by the private insurers when Reliance
GeneralsecuredtheAirIndiainsuranceaccountin2009.Hithertotheseinsuranceshadalwaysbeenheld
by the public sector companies. The transfer to Reliance caused some controversy at the time as
representativesofacompetingpublicsectorconsortiumledbyNewIndiawrotetotheairlinequestioning
thesecurityofferedbytheReliancebid.
Statistics
The following MAT gross written premiums and net incurred losses were registered for the five years to
March2009.
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Marine Hull
Summary and Trends
The national reinsurer, the General Insurance Corporation of India (GIC Re) which amongst other things
manages the Indian marine hull pool and the government war risks scheme, reports that due to the
worldwideeconomicslowdownin2008-09thedemandforhullinsurancedeclined.Thisledtoanincrease
of idle tonnage, a decline in the number of new vessel acquisitions and a downwards trend in vessels'
revaluation.Lessinsurableshippingmeantmorecompetitionamongstinsurersforhullbusinessandthus
morecompetitivepremiumpricing.Premiumincomegrewbyamodest4.8%duringtheyear.
In2010,withsignsthattheglobaleconomywasrecovering,marinehullinsurerswereconfidentthattheir
portfoliosofbusinesswouldgrowinamoresatisfactorymanner.
There are official incentives to encourage the development of the shipping industry. Government policy
gives automatic approval for the "acquirers" of ships and allows them to retain sale proceeds for
reinvestment. It has relaxed "cabotage" laws (limiting navigation in territorial waters) for container ships,
andithasdecontrolledfreightandpassengerfaresinordertopromotecoastalshipping.Shipsandinland
watervesselsqualifyforanaccelerateddepreciatedrateof20%.
Statistics
Thefollowingstatisticsformarinehullinsurancecoverthethree-yearperiodto31March2009.
Marine Hazard
Cyclone is probably the major local peril apart from the intermittent threat of war between India and
Pakistan. Tensions have eased significantly, however, since 2003-04. The border between the two
countrieshasbeenopenedandpeacetalksaboutthedisputedterritoryofKashmirhavebeenresumed.
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PiracyintheGulfofAdenremainsathreat.InNovember2008,itwasreportedintheinsurancepressthat
IndianvesselswerelosingUSD450,000amonthoncostover-runsanddelaysinmeetingdeadlineswhilst
crewswerereluctanttosailtotheGulf,oneoftheworld'smostimportantseatraderoutes.AroundUSD
100bn of India's sea trade passes through the Gulf, according to the Indian National Ship Owners
association(INSA).TheIndiangovernmenthasjoinedothersinsendingwarshipstotheareatocombatthe
piratethreat.
Theliberalisationofthegovernment'sshippingpolicyinrecentyears,aimedatfacilitatingautomaticofficial
approvalfortheacquisitionofshipsandtheretentionofsaleproceedsisbeginningtopayoff.Newships
have been joining the national fleet as a result of this, although the present downturn in the economy is
slowingdownthisprocess.Underwritersreportthatoldershipsarewellmaintained.Therehavebeenno
complaintsaboutthestandardofseamanshipofcrewsonIndian-registeredvessels.
Marine Risks
Indiahasoneofthelargestfleetsamongstcountriesofthedevelopingworld.AccordingtoIHS Fair Play
2010-11,ofthe245orsoshippinglinesinIndia,thesixlargestbluewateroperatorsare:
TheShippingCorporationofIndia(107vesselsover500GT)
GreatEasternShippingCo(32vessels)
EssarShippingCo(19vessels)
VarunShippingCo(12vessels)
TolaniShippingCoLtd(10vessels)
BengalTigerLine(India)PvtLtd(eightvessels).
In addition to the passenger liners, cargo ships and tankers which the above-mentioned companies
operate,theIndiannationalfleetcontainsmanyspecialisedvesselssuchasoffshoresupplyships,floating
drydocks,dredgers,offshoredrillingrigsandplatformsandoceanographicresearchships.
Althoughthefishingsectorsuffersfromalackofmodernfishingcraft,equipmentandprocessingfacilities,
production has expanded gradually during the past four decades. Most fishing vessels tend to be
individuallyowned.Around50%to60%areinsured.Somevesselsarelaidupduringthemonsoonseason
whilst others continue to go to sea as and when they have the permission of the port authorities. The
vesselsareinsuredtypicallyforaroundINR25toINR30lakhsorINR2.50mntoINR3.00mn(USD56,625
toUSD67,950).
Otherspecialisedvesselsincludelargenumbersofcountrycraft,manyofwhicharewoodensailingships
anduninsured.
Demandforpleasurecraftinsuranceispickingup.Itisnotknownwhetheranyspecialwordingshavebeen
developedforthebusiness.Inthemeantime,hullpolicieswithyachtwordingsareissued.
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The Institute Time and Voyage Clauses form the basis for most policies issued for vessels and their
machinery.Inadditiontohullandmachinery,themarketofferscoverforfreight,builders'risk,lossofhire
andprofitscovers.
Since 1 January 2005 ship owners have been free to place their war risk cover directly with the public
sector insurers as well as the private offices. Previously the owners were compelled to insure their war
risks directly with the government through the War Risk Insurance on Marine Hulls (1976) scheme.
Althoughthegovernmentprovidedthecover,thepublicsectorinsurersmanagedthescheme.
Theshippingindustrywelcomedthedevelopmentbutthegeneralfeelinginthemaritimemarketisthatthe
newschemerepresentsonlyapartialsolution.Shipownerswanttobeallowedtoplacetheirwarriskcover
inoverseasmarketstotakeadvantageofthelowerpremiumsthere.
Thegovernmentwassaidtobechargingapremiumof0.08%perannumonthemarketvalueoftheship
forthepeacetimewarriskcover.Thiswasconsideredtobeonthehighside,ascoverwasavailableinthe
Londonmarketat20%ofthegovernmentpremium.
Thecessiontothemarinehullriskpoolis20%subjecttoamaximumofINR160mn(USD3.62mn)any
onevessel.
Rating
The marine hull tariff was abolished in 2005. This class of business has been "detariffed" since then.
Insurersnowapplytheirownpremiumrateswhichareverycompetitiveduetothefiercecompetitionforthe
limitedamountofinsurablebusinessonoffer.
Loss Experience and Largest Losses

In the absence of separate statistics for marine hull, no detailed loss data can be provided but market
practitioners are of the opinion that overall the business is profitable. The following major losses have
occurredsince2003.
The insurance press reported that in February 2003 at least six persons were killed and more than a
dozen workers were injured at what was described as the world's largest ship-breaking yard at Alang,
north of Mumbai, when a crude oil tanker caught fire. The ship was being prepared for auction, after
completing its final voyage, when it caught fire. The dead, mainly labourers, were trapped inside the
vessel.Nodetailsofanyinsurancelossesweregiven.
Duringthe2004-05financialyear,theGICRereportedthelossofthevesselLok Pragati,whichsankoff
the coast of China. GIC Re's share of the subsequent insurance claim was INR 17.92 crores or INR
179.20mn(USD4.06mn).
GICRereportedthatamajorfireoccurredonaforeignvesselHyundai Fortuneon21March2006and
thatthecorporation'sexposureofanunquantifiedlossamountwas5%.
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In 2007-08 GIC Re reported one major estimated loss in its domestic portfolio of hull business of INR
20.17croresorINR201.7mn(USD4.64mn).
In October 2008 an Indian cargo ship with 13 sailors on board was hijacked by armed pirates off the
northerncoastofSomalia.
Major Insurers
AccordingtomarketstatisticscompiledbyInterlinkInsurance&ReinsuranceBrokersPvtLtdtheleading
hullinsurerswithmarketshareinpercentagesin2008-09wereasfollows:
NewIndia
34.58%
Oriental
20.47%
ICICILombard
16.03%
UnitedIndia
14.30%
National
7.90%
IFFCOTokio
3.94%
Reinsurance
Marinehullbusinesscoverisarrangedbya10%compulsorycessiontoGICReandafurther20%tothe
pool.TheIndianMarketSurplusTreatyhasacapacityofINR800mn(USD18.12mn).
Distribution
Itisunderstoodthatmosthullbusinessishandledonadirectbasis,butsincebrokersenteredtheIndian
marketin2003theyhavepickedupashareofhullbusinessintheirpursuitofcorporateclients.
Marine Cargo
Summary and Trends
ItissaidthatcargobusinessstillgeneratesagreatervolumeofpremiumthanotherMATclassesinspiteof
rate reductions brought about by fierce competition between insurers and a downturn in global trade. In
2010,someinsurerssaidthatfromtheirexperiencethemarketwassoft.Othersdescribeditasonewhose
businessisnolongerlookeduponasalossleader,butfromapricingpointofview,hastostandonitsown
feet.Whateverthesituation,overallpremiumincomefortheclassgrewby12.1%in2008-09.
India's principal exports include engineering goods, textiles and clothing, and gems and jewellery. The
country'smainimportsarepetroleumandalliedproducts,capitalandelectricalgoods,andgoldandsilver.
TheGeneralInsuranceCorporationofIndia(GICRe)isoftheopinionthatthegrowthtrendinmarinecargo
premium income will continue because of large oil imports and an increasing number of investors in the
powersector.
Althoughimportersandexportersofgoodsmaynotpurchasemarinecargoinsurancefromnon-admitted
insurers,internationalmarinecargomaybeinsuredelsewhere,inaccordancewiththetermsoftradesuch
asimportsonaCIFbasis.
Statistics
Thefollowingstatisticsforcargoinsurancecoverthethree-yearperiodto31March2009.
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Hazard
India has 12 major ports, seven on the west coast and five on the east, which are managed by the Port
Trust of India. The major ports, which manage 75% of all cargo, handled 464 mn tonnes of cargo in
2006-07,thelatestyearforwhichinformationwasavailable.Indianportsarecursedwithinefficiency.They
handle 90% of Indian trade in terms of volume and, with foreign trade having grown in excess of 20% a
year since 2002, port capacity is in urgent need of expansion. Although the turnaround time at ports
improved from 8.5 days in 1996-97 to about 3.6 days in 2006-07, generally speaking cost efficiency at
Indianportsislowcomparedwiththeworldaverage.InHongKong,forexample,theaverageturnaroundis
a mere 10 hours. Poor connections to inland areas, poor port management and inefficient custom
clearancetranslateintohighcosts.
Congestion still causes delays at most Indian ports. Although it is said that labour disputes occur less
frequently than previously, strikes still contribute to delays. On the other hand monsoons rarely disrupt
cargohandling.
Accumulationscanoccuratcertaintimesoftheyear.Importersdeliberatelypostponingcargocollectionin
order to defer the payment of duty can aggravate the problem. There have been no serious dock fires
duringthepast20yearsorso.
Underwriters report that the most troublesome losses are those associated with shortage and damage.
Eventhoughmoreandmorecargoiscontainerised,pilferageremainsaproblem.Thievesbreaktheseals
oncontainersandreplacethemwithduplicatesoncetheyhaveextractedthecontents.InMay2010,there
wasstillcriticismfromtheinsurancecommunityaboutthelackofportsecurity.
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Independentsurveyorsandsupervisorsoverseeloadingandunloading.
Insofarasinlandtransitisconcerned,lossesasaresultofoverloadingareaproblem.Oneprivateinsurer
isknowntoapplyawarrantywhichstipulatesthatnolosseswillbemetifthereisevidenceofoverloading.
TruckswithfreightintransitonIndianroadscanbetrackedbysatellite.Insomecasesarmedguardstravel
withthem.

MostmarinecargopoliciesarebasedonInstitute Cargo Clausesthatappearinthreeversions,A(allrisks)
and, B and C (named perils). As far as import/export business is concerned, specific types of policies
coveringparticularconsignmentsareavailableasareopencovers,issuedforoneyear,andcustomduty
cover. Similar policies are available for inland transit. A special declaration policy covers transit
consignmentsaboveanagreedamount,sayINR10mn(USD226,500).Inlandmarinecanbeextendedto
coverthefollowingperils:
strike,riotandcivilcommotion(includingactsofterrorism)
FOB - where the inland transit is required to be extended to cover the goods until they are loaded on
boardavessel,thisextensioncanbetaken.
Import/exportpoliciescanalsobeextendedtoincludewarand/orSRCCperils.
Rating
Themarinecargotariffwaswithdrawnwitheffectfrom1April1994.
Following a good deal of unseemly competition, however, the four state-owned insurers set up a marine
cargomarketagreementwhichprovidedratescovering125importcommodities.Thishasnowevolvedinto
a free rating environment. In 2010, some insurers said that from their experience the market was soft.
Othersdescribeditasonewhosebusinessisnolongerlookeduponasalossleader,butfromapricing
pointofview,hastostandonitsownfeet.
Londonmarketwarratesareapplied.
Loss Experience
According to market-wide statistics prepared by the brokers, Interlink, the cargo net incurred loss ratio in
2008-09was85.60%whichsuggestsanoverallloss.
Particularly heavy losses have occurred at times of severe weather conditions. For example, in the
insurance year 1998-99, cyclones which lashed Gujarat and Orissa resulted in a large number of losses
bothhullandcargo.
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TheAsiantsunamiofDecember2004causedaconsiderableamountofdamagetocargoatthesmallport
of Nagapattinam on the south-east coast but when this report was in preparation no information was
available as to the amount of the insured loss. The major port of Chennai (Madras) suffered only minor
damage.
Inland marine is looked upon as an unattractive class of business and many insurers accept it on an
accommodation basis only. Losses frequently involve the substitution of containers. Overloading of
vehiclesisaproblem.
Thehijackingandtheftofpharmaceuticalproductsisanotherproblem.ItwasreportedinthepressinJune
2006that"theclaimsarehugeduetothehighresalevalueofpharmaceuticalitems".Theaveragelossina
single consignment can be INR 40mn (USD 906,000) to INR 50mn (USD 1.13mn) for trucks and INR
100mn(USD2.27mn)inthecaseofships.Toreduceitsexposuretosuchincidents,thepharmaceutical
industry breaks up its consignments and sends drugs in smaller volumes. It also tries to keep its
consignmentsoffstateborderareasatnight,wheretruckshavetomovefromonestatetoanotherandare
stoppedatoctroi(localtax)pointsforcheckingandpayingtaxes.
Border areas are notorious for pilferage and hijacking. Insureds now plan truck movements so that the
consignmentscrossbordersduringdaylighthoursonly.
TruckswithfreightintransitonIndianroadscanbetrackedbysatellite.Insomecasesarmedguardstravel
withvehicles.
Major Insurers
AccordingtomarketstatisticscompiledbyInterlinkInsurance&ReinsuranceBrokersLtdtheleadingcargo
insurerswithmarketshareinpercentagesin2008-09wereasfollows:
NewIndia
18.80%
UnitedIndia
18.00%
Oriental
14.84%
National
11.38%
TATAAIG
9.09%
ICICILombard
7.03%
Reinsurance
ThemarketsurplusfacilityamountstoINR50croresorINR500mn(USD11.33mn).Excessoflosscovers
operatetoprotectthemarket'sretainedaccount.
Distribution
Mostcargobusinessisstillproducedbyagentsorplaceddirectlybyclients.Brokersareacquiringalarger
marketshare.
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Marine Liability
Summary and Trends
Three distinct classes of marine liability business are written in the Indian market. Stevedores' liability is
handled in the miscellaneous non-life department, hull offshore risks and terminal operators in the hull
departmentandP&Iclubsofwhich13arerepresentedinIndiaatthepresenttime.
Local Market
The four state-owned non-life insurers, New India, National, Oriental and United India write stevedores'
liability,hulloffshoreandterminaloperators.Itistooearlytosaywhetherthenewprivateinsurersintendto
participateinthebusiness.
ThelocalrepresentativesofclubshandleP&Ibusiness,whichincludescargoandcrewliability.Nowadays
mostoftheclubsareregisteredinBermuda,eveniftheirmainofficesareinLondonandelsewhere.
Apartfromthelocalrepresentatives,thereisafixedpremiummarketcomposedofnon-mutuals.
Compulsory Covers
It is compulsory for ships entering Indian ports to hold a valid P&I certificate which must cover pollution
risks.
ItwasreportedintheinsurancepressinSeptember2006thatIFFCOTokioGeneralInsuranceCoplanned
to offer short-term P&I cover for ships whilst they are berthed in Indian ports. This came at a time when
proposalsforcompulsoryP&Iinsuranceforshipsinsuchportswerebeingintroduced.
Theproposalsweremeanttoensurethatshippingcompaniespaidfordamagetoportinstallationscaused
by their ships and also covered shipwrecks and oil spills. Following protests from shipping companies,
however,theIndiangovernmentdecidedtokeeptherulesinabeyance.Asanalternativetoshipowners
takingoutinsurance,itwassuggestedthattheportoperatorsshoulddoit.InAugust2006ameetingwas
heldinMumbaibetweeninterestedpartiesincludingthegovernment'snauticaladviser,totryanddecide
whether the ship owners or the port operators should arrange appropriate insurances and the
corresponding cost of the premiums. The matter has been left unresolved since neither party wishes to
take responsibility. In May 2010 when enquiries were last made, it was reported that there had been no
furtherdevelopment.
Pollution
It is compulsory for ships entering Indian ports to hold valid P&I certificates which must cover pollution
risks.
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P&I
CroweBoda,asubsidiaryofthereinsurancebrokers,JBBodaofMumbai(Bombay),representsoneofthe
largestP&IClubs,SteamshipInsuranceManagementServicesLtd(SteamshipMutual),arelationshipthat
haslastedatleast65years.CroweBodaisalsocorrespondentforTheShipowners'MutualProtectionand
IndemnityAssociation(SOPClub),whichspecialisesintheinsuranceofsmallvessels,tugs,bargesetc.
The publicly owned ship operator, the Shipping Corporation of India, has its vessels entered in the
SteamshipMutualandthreeotherclubs.
Limits of Liability
Limitsofliabilityforstevedoringrisksvaryaccordingtothecharacteristicsoftheriskwhilstthoseforhull
departmentbusiness,offshorerisksandterminaloperatorsaretypicallyINR10croresorINR100mn(USD
2.27mn)andINR25croresorINR250mn(USD5.66mn)respectively.
Major Insurers
Intheabsenceofcorrespondingstatisticsformarineliabilitysuchasstevedores'liability,hulloffshoreand
terminal operators' insurances, it is estimated that private insurers such as ICICI Lombard, Reliance and
TATAAIGmayhaveovertakenthepublicsectorinsurers.
Crowe Boda, a member of the Boda reinsurance broking group, represents Steamship Mutual and
Shipowners'MutualProtectionandIndemnityAssociationintheIndianmarket.
Energy
Summary and Trends
Eachofthefourstate-ownedinsurers,NewIndia,National,OrientalandUnitedIndia,writeallclassesof
energyinsuranceincludingconstructionandexplorationrisks.Theirclientsincludethoseinvolvedinboth
upanddownstreamactivities.
The National secured the insurance of the largest state-owned energy group, the Oil and Natural Gas
Corporation(ONGC)fortheyear2006-07forthecorporation'sonshoreassetsvaluedatINR260bn(USD
6.29bn).Theassetsinclude225productioninstallations,twomajorterminals,andabout75drillingrigs.At
thepresenttime,theinsuranceisledbyNewIndia.RenewalisinJune.
ONGC'soffshoreinstallationswereinsuredbyapanelconsistingofallfourpublicinsurersledbyUnited
Indiawith55%oftherisk,withtheothercompaniestaking15%each.Theannualpremiumincreasedby
109% over the previous year due to the extremely poor claims ratio in 2005. The worst loss was the
destructionoftheBombayHighNorthplatforminJulyofthatyear.
This was one of the worst disasters in the history of India's petroleum industry. On 26 July the platform,
located100miles(161km)offtheMumbaicoast,wasdestroyedbyfire.Thisoccurredafterasupplyship
collided with the platform during rough weather generated by a monsoon storm. The platform was
producing100,000barrelsofoiladayatthetimeoftheaccident.ItispartoftheBombayHighOffshore
oilfield, which accounts for about 40% of India's domestic crude production. Initial insurance losses were
estimatedatUSD260mn.
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Aviation
Summary and Trends
TheIndianaviationindustryisamongstthefastestgrowingintheworld.AccordingtotheAirportsAuthority
ofIndia,airpassengertrafficin2007-08,thelatestyearforwhichdataisavailable,grewby21%to116.90
million (domestic 87.10 million and international 29.80 million). Estimates suggest that significant growth
continues.
The entry of low-cost carriers has led to a marked drop in fares, and air travel has become increasingly
affordable, especially for India's growing middle class. Private operators have steadily increased their
market share at the expense of the once dominant state-owned Indian (formerly Indian Airlines). Private
airlinesnowaccountformorethantwo-thirdsofdomestictraffic.Pressureonairportsandonlandingand
parkingslotslimitsgrowthoftheindustry.Amajoroverhauloftheleadingairports,notablyDelhi,Mumbai
(Bombay), Kolkata (Calcutta) and Chennai (Madras) is in hand. A new international airport opened in
BangaloreinMay2008.
Themergerofthetwostate-ownednationalcarriersIndianAirlinesandAirIndiawascompletedinAugust
2007, but the integration of the fleet and staff could take at least two years. The privately owned Jet
Airwaysfinalisedamergerwithitsrivalcarrier,AirSaharainApril2007.ThemergedcompanyisIndia's
largestdomesticoperator.
AprivatesectorinsuranceconsortiumledbyRelianceGeneralInsuranceCowonthetenderforproviding
the 2009-10 insurance for the national flag carrier, Air India. This ends a public sector consortium's
seven-year control of the business. The private sector group is led by Reliance with HDFC Ergo, Bajaj
Allianz and IFFCO Tokio General as partners. The public sector consortium was led by New India. The
private sector bid for the business was understood to be USD 24.3mn whilst that of the public sector
competitionwasUSD24.9mn.
Statistics
Therearenoseparatestatisticsforaviationbusiness.
Airlines
=================================================================================
Update November 2010
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TheNationalAviationCompanyofIndia(NACIL),whichincludestheAirIndiaaccount,hasplacedits
insurancecoverwiththeleadingprivateinsurer,ICICILombardforthe2010-11policyyear.Accordingto
reportsintheinsurancepress,NACILispayingUSD29.95mninannualpremiumforthenewpolicywhich
coversallairlineswithintheNACILgroupforhull,liability,warandwarliabilityrisks.Thenewpremium
compareswiththeUSD24.30mnwhichNACILpaidlastyearwhentheinsurancewasplacedwitha
consortiumledbyanotherprivateinsurer,RelianceGeneral.TheplacingbrokerisJLTwhichwonthe
accountfromitsrivalMarshwhichhaditselftakentheaccountonlyforayearhavinginturntakenitfrom
Aon.
=================================================================================
Themergerofthetwostate-ownednationalcarriers,IndianAirlinesandAirIndia,withinthenewlycreated
holding company the National Aviation Co of India Ltd (NACIL) was completed in August 2007, but the
integrationofthefleetandstaffcouldtakeatleasttwoyears.TheprivatelyownedJetAirwaysfinaliseda
merger with its rival carrier, Air Sahara, in April 2007. The merged company is India's largest domestic
operator.
AirIndiawascreatedin1932.JRDTata,thecompany'sfounder,pilotingalightsingle-enginePussMoth
from Karachi to Mumbai on 15 October of that year, undertook its first flight. The company was
incorporatedasAir-IndiaInternationalin1948andbeganitsinternationaloperationsthesameyearwitha
modestweeklyservicefromMumbaitoLondonviaCairoandGeneva.AirIndiawasnationalisedin1953.
AprivatesectorinsuranceconsortiumledbyRelianceGeneralInsuranceCowonthetenderforproviding
the2009-10insuranceforAirIndiaanditsassociatedcompanies.Thisendsapublicsectorconsortium's
seven-year control of the business. The private sector group is led by Reliance with HDFC Ergo, Bajaj
Allianz and IFFCO Tokio General as partners. The public sector consortium was led by New India. The
private sector bid for the business was understood to be USD 24.3mn whilst that of the public sector
competitionwasUSD24.9mn.
Privateoperators,aboveallJetAirwaysandSahara,haveseenasteadygrowthintheirmarketshareat
the expense of the state-owned Indian (formerly Indian Airlines) which once dominated the domestic
market.Competitionhasintensifiedevenfurtherasaresultoftheentryofbudgetairlinesandairtravelhas
becomemoreandmoreaffordable.
AirIndia,inwhichIndianAirlines,itsdomesticcarrier,isnowmerged,operates104Airbuses,32Boeing
777sandtwoDornier228s.
AirIndiaExpress,NACIL'sbudgetairline,operatesafleetof124Boeing737aircraft.
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InApril2007JetAirwaysagreedtopurchaseAirSaharaforUSD340mnandrenameditJetLite.Thiswas
marketedasacrossbetweenalow-budgetoperationandafullserviceairline,untilAugust2008whenit
wasfullyintegratedintoJetAirways.
JetAirwayshasafleetof90aircraftconsistingof13AirbusA330s,14ATR72s,57Boeing737sandsix
Boeing777s.
Otherprivateairlines,mostnotablyKingfisherAirlinesandthelow-costoperatorssuchasSpiceJet,Indigo
and GoAir amongst others are contributing to a very competitive aviation market in which penetration
remains low and opportunities for expansion are numerous. Air Deccan was merged with Kingfisher in
2008.
General Aviation
Some smaller operators provide domestic ancillary and feeder services, as well as numerous executive
andotheraircraftoncharter.FlyingclubsthroughoutIndiaowntraineraircraftandgliders.Otheraircraft,
whichareflyingregularlyinIndia,includealargenumberofhelicoptersandsomefixed-wingaircraft,which
areengagedincropspraying,whilstotherscarryoutmeteorologicalworksuchascloudseeding.
Space
The Indian Space Research Organisation (ISRO) runs the world's largest domestic satellite system,
operating 132 transponders from five satellites. These transponders serve 33,000 Very Small Aperture
Terminals(VSATs):30%ofthesebelongtocorporatenetworksandtheresttoserviceproviderssuchas
stockexchanges,telephoneoperatorsandeducationalnetworks.
The demand for VSAT connections grew dramatically between 1998 and 2000, the peak years of the
software boom, and the number of connections increased from 1,000 to 20,000 during the three-year
period. With the launch of the satellite, Insat 3, ISRO's own transponders have begun to catch up with
requirements. It launched Insat 4 in October 2004. It will have 12 KU-brand transponders for VSAT and
direct-to-home (DTH) television. It expects to provide 11 gigabits per second by 2007 with 250
transpondersofitsown.
The brokers J B Boda and Marsh place India's satellite insurance in the international market. New India
leadsacover,whichincludesfourbasicelementsasfollows:
manufacture
transittothelaunchpad
thelaunch
liabilityinorbit.
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In April 2001 the press reported that on 29 March a rocket launch that was to initiate a new chapter in
India'sspaceprogrammefailedafterafirebrokeoutshortlyafteritsRussianengineswereignited.Itwould
have been the country's first test launch of a geostationary satellite launch vehicle. The launch was
postponedindefinitely.Thethree-stageGSLV-DIwasduetoblastofffromtheSriharikotalaunchsiteinthe
southern state of Andhra Pradesh. Shortly after its engines were fired, spurts of flames could be seen
leapingupthesideoftherocket.Missioncontrolatthelaunchsiteimmediatelycuttheengines.Nodetails
weregivenabouttheinsurancearrangements.
AlthoughtheISROhasbuiltupthecapacitytolaunchsatellitesintoorbitandindeedhaslaunchedthreeof
its own, it has found it difficult to penetrate the world market for launches. The ISRO has launched four
100kg satellites, for Korea and Germany in 1999 and for Germany and Belgium in 2001. In September
2004itwasreportedthatithadwonaUSD10.0mncontracttolaunchanItalian600kgAgilesatelliteinto
lowearthorbit.Theorganisation's13tonnePolarSatelliteLaunchVehicle(PSLV)rocketwastoopowerful
forthissmallsatellite,sosomeofitssixstrap-onboostersweretakenoff.
It was reported in the press on 23 January 2007 that an orbiting Indian capsule had returned to earth,
givingafilliptothecountry'splansformannedspacemissions.Thecapsule,whichwaslaunchedon10
January,landedintheBayofBengal11dayslater.TheIndianSpaceResearchOrganisationsaidthatthe
missionwouldleadtothedevelopmentofre-usablespacecraft.Indiahopestoputamaninspaceby2014.
India'sfirstunmannedmoonmission,Chandraayan1,waslaunchedsuccessfullyon22October2008.
Aviation Liabilities
Compulsory carriers' liability is limited to INR 7.5 lakhs or INR 750,000 (USD 16,988) per passenger. In
October2008,therewastalkofapossiblelimitincreasebutnothinghasbeenreportedsince.
The Indian Airport Authority is understood to have an operator's liability insurance with a global limit of
indemnityofINR50croresorINR500mn(USD11.33mn).Thecorrespondingpolicy,ledbytheNational,
coversabout67airports,internationalanddomestic,throughoutthecountry.
Loss Experience
NodetailedclaimsexperienceisavailablefortheIndianaviationaccount.Notablelossessince2002are
describedbelow.
IndianAirlinesaircraftovershottherunwayatDelhion8March2002.Althoughnobodywasinjured,both
aircraftweresobadlydamagedthataconstructivetotallossofUSD20mnwasdeclared.
Twohelicoptercrashestookplacein2002,on8Mayand22August,involvinglossesofINR6andINR
7croresrespectively(INR60mnandINR70mnorUSD1.3mnandUSD1.5mnrespectively).
In August 2003 an MI 172 helicopter carrying 25 employees of the Oil and Natural Gas Commission
(ONGC)andfourcrewmemberscrashedintotheBombayHigh,India'soilandgasexplorationareain
theArabianSea.Itwasreportedatthetimethatonlythreesurvivorshadbeenfound.
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GICRereportedtwodomesticaviationlossesin2007,aJetAirways'ATRlossinJulywhichcostthe
corporation INR 6.50 crores or INR 65mn (USD 1.57mn) and a Pawan Hans helicopter accident in
September, costing INR 3.15 crores or INR 31.5mn (USD 761,808). No further details were available
whenthisreportwasinpreparation.
AconsortiumledbyRelianceGeneralInsuranceistheleadcompanyontheAirIndiaExpressBoeing
737800crashon22May2010.AirIndiaExpressisthebudgetarmofAirIndia.Onlyeightofthe166
people on board the flight survived the crash which occurred as the aircraft landed at Mangalore, in
India'ssouth-west.Theflight,whichoriginatedinDubai,isunderstoodtohaveovershottherunwayand
toppledintoadeepravineadjacenttotheairport.
Major Insurers
Probably the major insurer is now Reliance General since a consortium which it leads took over the
accountofAirIndiaanditsassociatesin2009.ItsconsortiumpartnersareHDFCErgo,BajajAllianzand
IFFCOTokio.
Reinsurance
ReinsuranceisplacedwithGICRe,includinga10%obligatorycession,withretrocessionstotheLondon
and other international markets. Surplus treaties and some facultative arrangements are placed together
withahullwarquotashare.
WhenNewIndialedtheNACILaccountitisunderstoodthatspecificexcessoflossprotectionforAirIndia
was arranged and that another excess of loss protected the market's net line on foreign placed
reinsurances.Atthattimethenetretentionofgrossdomesticpremiumforaviationwasprobablylessthan
10%.
It is not known what non-GIC Re reinsurance NACIL's new insurer, the consortium led by Reliance
General,hasarranged.
Distribution
Untilrecentyearsaviationbusinesswashandledonadirectbasis,butnowbrokersaremoreactive.Aon,
forexample,isinvolvedinbothretailandreinsurancebroking.
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Personal Accident
Summary and Trends
Accordingtostatisticscompiledbythebrokers,Interlink,personalaccidentgrosspremiumsincreasedby
17%between2007-08and2008-09.Thisgrowthhascomeaboutasaresultoftheincreasinginadequacy
ofstatutoryprovisionsforthepaymentofcompensationintheeventofaccidents.
The middle class is growing both in numbers and prosperity and is increasingly turning to insurance for
financial protection in the event of accidents. The government, meanwhile, is attempting to maintain its
support for the poorer members of society by collaborating with insurers to sponsor low-cost insurances
suchasthe"Janata"personalaccidentpolicy.
Grouppoliciesarecommon.Itisestimatedthat60%oftheinsurancemarket'spersonalaccidentaccount
comesfromindividualpoliciesand40%fromgroup.Thisdoesnotincludetheindividualpremiumcontent
ofhomeowners'andshopkeepers'combinedpolicies.
IntheIndianinsurancemarket,personalaccidentisclassifiedasnon-lifebusiness.Theclassisatargetfor
theprivateinsurersseekingtodevelopenhancednon-lifemarketshare.
Statistics
Premiumandclaimsstatisticsforthethreeyearsto31March2009areasfollows:

Personal accident policies normally cover death, permanent total and partial disablement, and temporary
disablement.Additionalbenefitsincludetheexpensesofrepatriatingtheremainsofdeceasedinsuredsand
the payment of an education grant to dependent children in the event of death or permanent total
disablementoftheinsuredpersons.
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Upon the payment of an additional premium, policies can be extended to include medical expenses
incurredasaresultofanaccident.
Asaruleofthumb,capitalsumsarerestrictedtotheequivalentoftwoyears'earningsshouldtheproposer
optforthefullrangeofthebenefitsmentionedabove.Incaseswherearestrictednumberofbenefits,such
as death only or death and permanent disablement are chosen, limits of the equivalent of six or seven
years'earningsmaybegranted.
Annualpoliciesprovideworldwidecoverandtravelinsurancecanbecontractedthroughtravelagentson
bothanindividualandagroupbasis.Boothsatairportsissueshort-termcouponinsurancebutthiscovers
theflightonlyandisnotpopular.

Premiumratesarequotedonapermillebasisandareclassifiedaccordingtotherangeofbenefitschosen
andtheproposer'soccupationalriskgroup.
Thefollowingexamplesofratesarefairlytypical():
Teacher-deathandtotalpermanent
disabilityonly
0.70
Bankclerk-deathonly
0.45
Supervisingbuilder-fullrangeof
benefits
2.00
Workerinhazardousoccupation
-deathonly
0.90
-fullrange
3.00
Medicalexpensesaregivenasanextensiontothepolicyatanadditionalrateof20%ofthepremiumrate.
Group policies issued on a "named persons" basis are rated in accordance with the premium tables for
individuals.Othertablesareusedforgrouppolicieswrittenonan"unspecified"basis.Premiumdiscounts
areapplied,dependentuponthesizeofthegroups.
The low-cost government-sponsored Janata scheme policy pays benefits if the insured sustains bodily
injury resulting solely and directly from accidents caused by outward, violent and visible means. The
minimumsuminsuredisINR25,000(USD566)andamaximumofINR100,000(USD2,265)perperson
perannum.TherateofpremiumisINR15(USD0.33)persuminsuredofINR25,000(USD566),which
canbeincreasedinmultiplesofINR25,000(USD566).
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Similarschemesincludeonefortheruralcommunity,theGraminpolicy,whichgivesdeathandpermanent
totaldisablementbenefitsatINR5,000(USD113)eachandaprovisionofabenefitofhalfthatamountfor
thelossofoneortwolimbsoreyes.TheannualpremiumisINR6(USD0.13).
The Insurance Regulatory and Development Authority Act 1999 obliges all insurers to provide a
compulsoryservicetoruralandsocialsectors.Inbrief,aruralsectormeansanyplacewithapopulationof
not more than 5,000 and a social sector includes "unorganised workers" and economically vulnerable or
backwardclasses.Insurersareobligedtowriteaprescribedpercentageofitspoliciesinanyfinancialyear
forthesectors.Itislikelythatagoodnumberofsuchpolicieswillbepersonalaccident.
Loss Experience
The2008-09incurredlossratioof83.5%indicatedbyInterlinksuggeststhattheclassisunprofitable.
Injured passengers and the families of those killed in the terrorist bomb attack on a commuter train in
Mumbai (Bombay) in July 2006 are each entitled to compensation of up to INR 4 lakhs or INR 400,000
(USD 9,060 at current rates) from the four state-owned non-life insurers. The amount is the maximum
compensationpayablebytherailways.ItwasincreasedfromINR2lakhsorINR200,000(USD4,530at
current rates) in 1997. Indian Railways has covered all its passengers under a personal accident policy.
Substantialclaimsareexpectedfromcreditcardcompanies,whichbuylargeamountsoflifeandpersonal
accidentinsuranceforcardholders.Mostofthevictimsweretravellinginfirst-classcarriages,andmightall
becreditcardholderswithlargesumsinsuredundersuchcover.
Theextentofpersonalaccidentclaimsarisingoutoftheinfamousterroristattackonanumberoflocations
inMumbaion26November2008isasyetunknown.
Major Insurers
In 2008-09, according to information from Interlink Insurance & Reinsurance Brokers Ltd, the major
insurerswithpercentagemarketsharewereasfollows:
Oriental
16.5%
UnitedIndia
15.07%
TATAAIG
12.82%
ICICILombard
12.37%
NewIndia
12.24%
National
9.07%
Reinsurance
Itisunderstoodthatpersonalaccidentinsuranceisreinsuredundermiscellaneousaccidentsurplustreaties
and excess of loss facilities. Facultative reinsurance is placed for high sums insured and known
accumulations.
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Distribution
Insurers and travel agents distribute personal accident insurance. Some products are available at airport
booths but enquiries suggest that, at Mumbai (Bombay) airport at least, these products are restricted to
personalaccidentcoveronly.
Someinsurersprovideanonlinedistributionservice.
Creditor Insurance
Travel
Summary and Trends
Annualpersonalaccidentpoliciesprovideworldwidecoverandtravelinsurancecanbecontractedthrough
travel agents on both an individual and a group basis. Booths at airports issue short-term coupon
insurance.Someinsurersissuepoliciesonline.
India'semergingmiddleclassesaretravellingtoanincreasingextent.Thecombinationofrisingincomes
and the deregulation of flights has led to a surge of interest in overseas travel, especially in Asia where
Hong Kong is a particularly popular tourist destination. The growing economy is encouraging more
businesstravel.
Statistics
Travelpremiumsarelikelytobeincludedinthoserecordedforpersonalaccident.

The most common form of travel policy offered to insurance consumers in India is the "Overseas
Mediclaim".Thisinsuranceprovidesindemnityforexpensesnecessarilyincurredforimmediatetreatment
of illness, diseases contracted or injury first sustained during the period of insurance, and in addition
personal accident, total loss of checked baggage, delay of such baggage, loss of passport and personal
liability.
The private company Bajaj Allianz has been targeting the large student community leaving for education
overseasandisofferingitadditionalcoverssuchasfreetravelbackhomeandan"expensespaid"tripfor
aparentintheeventofunforeseencircumstances.

Ratingdependsonthelengthoftheinsuredjourney,andavarietyofplansareofferedbythe"Overseas
Mediclaim".Therearethreeoftheseasfollows:
worldwidetravelexcludingUS/Canada
worldwidetravelincludingUS/Canada
corporatefrequenttraveltoalldestinationsincludingUS/Canada.
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Cover may be restricted to USD 10,000 for the treatment of illness or disease if insureds above certain
ageshavenothadtimetoundergotheprescribedmedicalexaminationsbeforethestartofthejourneysfor
whichtheinsurediscontracted.
Loss Experience
Noinformationaboutlossexperiencewasavailablewhenthisreportwasinpreparation.
Major Insurers
The four state-owned insurers New India, United India, National and Oriental write travel insurance.
AccordingtopressreportstheprivateinsurerBajajAllianzhasmadeanimpact.
Reinsurance
Itisunderstoodthattravelinsuranceisreinsuredundermiscellaneousaccidentsurplustreatiesandexcess
oflossfacilities.Facultativereinsuranceisplacedforhighsumsinsuredandknownaccumulations.
Distribution
Bothinsurersandtravelagentsdistributetravelinsurance.Someproductsareavailableatairportbooths
butenquiriessuggestthat,atMumbai(Bombay)airportatleast,theseproductsarerestrictedtopersonal
accidentcoveronly.
Someinsurersprovideanonlinedistribution.
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Insurance Supervisor's Report
Summary
ThelatestannualreportandmarketstatisticswereissuedbytheInsuranceRegulatoryandDevelopment
Authority(IRDA)forthefinancialyear2008-09,thatis,coveringthe12monthsto31March2009.
Additional information is provided by Interlink Insurance & Reinsurance Brokers Pvt Ltd, based on that
publishedbyIRDA.
Change in Format
IRDAstatisticscoverfourprincipalclassesofnon-lifebusiness,namelyproperty,motor,miscellaneousand
marine, aviation & transit (MAT). Motor figures have been available since 2007 only. No other changes
havetakenplacelately.
Interlinkfigures,basedonthosecollectedbyIRDA,includethoseforanumberofsub-classesofnon-life
that are not available in the IRDA reports. As far as is known Interlink statistics have not undergone any
changeinformatinrecentyears.
Date of Latest Report

The latest reports from both IRDA and Interlink correspond to the financial year 2008-09, that is to say,
from1April2008to31March2009.
=================================================================================
Update April 2011
Newstatisticalinformationhasbecomeavailablesincethisreportwaspublished.Thesenewstatisticsmay
bedifferentfromthestatisticsandcommentaryinthetextofthisreport,whichwerepreparedatthetimeof
theconsultant'svisittothecountry.
=================================================================================
Non-Life Market Totals

Introduction
=================================================================================
Update April 2011
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=================================================================================
Thefollowingtablecoversthefive-yearperiodto31March2009.Totalgrosswrittenpremiumsarestated
inINRandUSDwiththeaverageannualrateofexchangeappliedtotheyearinquestion.Lossratiosare
calculatedonthebasisofnetincurredclaimstogrosswrittenpremiums.Constructionandliabilitystatistics
arefurnishedbyInterlinksince2007.
Yearly
Inthistablecompleteyearsareshown.Ifquarterlyfiguresareavailabletheseareshownunderaquarterly
tablebelow.
YEAR
2006
2007
2008
2009
2010
231,689.20
246,314.40
260,098.40
298,928.50
39,659.00
58,350.10
75,064.80
93,327.70
TOTAL NON-LIFE Excluding PA & Healthcare

PremiumsINRmn
181,389.70
TOTAL PA & HEALTHCARE

PremiumsINRmn
22,207.50
TOTAL NON-LIFE INCLUDING PA & HEALTHCARE

PremiumsINRmn
203,597.20
271,348.20
304,664.50
335,163.20
392,256.20
Growth%
16.47%
33.28%
12.28%
10.01%
17.03%
PremiumsUSDmn
4,493.73
6,562.39
7,002.98
6,924.14
8,621.02
Growth%
13.37%
46.03%
6.71%
(1.13)%
24.51%
RateofExchangeto
USD
45.3070
41.3490
43.5050
48.4050
45.5000
Source: General Insurance Corporation (GIC) and the Insurance Regulatory Development Authority (IRDA)
Due to rounding some totals may not equal the breakdown above.
Non-Life Insurance
Premiums and Loss Ratios
=================================================================================
Update April 2011
=================================================================================
India-Non-Life(P&C)
193
AXCO2011

Yearly
tablebelow.
YEAR
2006
2007
2008
2009
2010
37,745.30
44,087.20
37,169.20
36,382.80
41,871.20
15.09%
Property
PremiumsINRmn
Growth%
13.32%
16.80%
(15.69)%
(2.12)%
PremiumsUSDmn
833.10
1,066.22
854.37
751.63
920.25
Growth%
10.30%
27.98%
(19.87)%
(12.02)%
22.43%
Lossratios%
58.59%
54.61%
72.88%
71.85%
76.66%
Combinedratios%
94.59%
43.20%
70.44%
72.88%
78.06%
13,883.60
14,518.00
15,886.40
16,856.40
Construction & Engineering

PremiumsINRmn
n/a
Growth%
n/a
n/a
4.57%
9.43%
6.11%
PremiumsUSDmn
n/a
335.77
333.71
328.20
370.47
Growth%
n/a
n/a
(0.61)%
(1.65)%
12.88%
Lossratios%
n/a
58.30%
36.75%
56.39%
53.74%
Combinedratios%
n/a
43.63%
24.95%
39.54%
40.55%
87,333.80
110,799.40
130,612.90
138,031.90
154,016.60
Motor
PremiumsINRmn
Growth%
n/a
26.87%
17.88%
5.68%
11.58%
1,927.60
2,679.61
3,002.25
2,851.60
3,384.98
Growth%
n/a
39.01%
12.04%
(5.02)%
18.70%
Lossratios%
n/a
77.12%
84.53%
84.29%
78.37%
Combinedratios%
n/a
81.40%
87.70%
88.15%
82.59%
PremiumsUSDmn
Workers' Compensation
PremiumsINRmn
Growth%
Nostatisticsavailableforthisclass.
PremiumsUSDmn
Growth%
Lossratios%
Combinedratios%
Liability
PremiumsINRmn
n/a
5,443.50
6,158.80
6,714.80
7,545.70
Growth%
n/a
n/a
13.14%
9.03%
12.37%
PremiumsUSDmn
n/a
131.65
141.57
138.72
165.84
Growth%
n/a
n/a
7.53%
(2.01)%
19.55%
Lossratios%
n/a
22.09%
34.25%
39.07%
45.53%
Combinedratios%
n/a
36.37%
48.58%
51.61%
56.83%
42,674.20
56,280.30
Surety, Bonds & Credit

PremiumsINRmn
Growth%
PremiumsUSDmn
Growth%
Lossratios%
Combinedratios%
Miscellaneous
PremiumsINRmn
43,469.70
40,522.70
39,145.10
India-Non-Life(P&C)
194
AXCO2011

YEAR
Growth%
2006
2007
2008
2009
2010
(66.36)%
(6.78)%
(3.40)%
9.02%
31.88%
959.45
980.02
899.78
881.61
1,236.93
PremiumsUSDmn
Growth%
(67.26)%
2.14%
(8.19)%
(2.02)%
40.30%
Lossratios%
333.65%
46.10%
52.77%
50.38%
70.58%
Combinedratios%
499.11%
49.64%
54.80%
55.03%
73.59%
22,358.30
Marine, Aviation & Transit

PremiumsINRmn
12,840.90
16,952.80
18,710.40
20,408.30
Growth%
4.56%
32.02%
10.37%
9.07%
9.55%
PremiumsUSDmn
283.42
409.99
430.07
421.62
491.39
Growth%
1.77%
44.66%
4.90%
(1.97)%
16.55%
Lossratios%
57.03%
81.44%
73.53%
100.50%
73.47%
Combinedratios%
98.81%
81.56%
78.14%
103.75%
78.87%
181,389.70
231,689.20
246,314.40
260,098.40
298,928.50
3.77%
27.73%
6.31%
5.60%
14.93%
4,003.57
5,603.26
5,661.75
5,373.38
6,569.86
TOTAL
PremiumsINRmn
Growth%
PremiumsUSDmn
Growth%
RateofExchangeto
USD
1.00%
39.96%
1.04%
(5.09)%
22.27%
45.3070
41.3490
43.5050
48.4050
45.5000
Source: General Insurance Corporation (GIC) and the Insurance Regulatory Development Authority (IRDA)
Personal Accident
Premiums and Loss Ratios
=================================================================================
Update April 2011
=================================================================================
Whenthisreportwasinpreparation,nofigureswereavailablefor2004-05eitherfromIRDAorInterlink.
HealthcareisaddressedasaproductlinewithintheAxcolifeandbenefitsreports.
Yearly
India-Non-Life(P&C)
195
AXCO2011

tablebelow.
YEAR
2006
2007
2008
2009
2010
PA & Healthcare Written By Non-Life Companies

PremiumsINRmn
Growth%
PremiumsUSDmn
22,207.50
39,659.00
58,350.10
75,064.80
93,327.70
n/a
78.58%
47.13%
28.65%
24.33%
490.16
959.13
1,341.23
1,550.77
2,051.16
Growth%
n/a
95.68%
39.84%
15.62%
32.27%
Lossratios%
n/a
104.77%
82.15%
92.16%
96.68%
Combinedratios%
n/a
110.30%
88.00%
99.35%
102.97%
PA & Healthcare Written By Life Companies

PremiumsINRmn
Growth%
PremiumsUSDmn
Growth%
Lossratios%
Combinedratios%
PA & Healthcare Written By Other Companies
PremiumsINRmn
Growth%
PremiumsUSDmn
Growth%
Lossratios%
Combinedratios%
TOTAL
PremiumsINRmn
Growth%
PremiumsUSDmn
Growth%
Lossratios%
RateofExchangeto
USD
22,207.50
39,659.00
58,350.10
75,064.80
93,327.70
n/a
78.58%
47.13%
28.65%
24.33%
490.16
959.13
1,341.23
1,550.77
2,051.16
n/a
95.68%
39.84%
15.62%
32.27%
n/a
n/a
n/a
n/a
n/a
45.3070
41.3490
43.5050
48.4050
45.5000
Source: IRDA (Insurance Regulatroy Development Authority)

India-Non-Life(P&C)
196
AXCO2011

Introduction
Therankingofnon-lifeinsurersintermsof2008-09premiumrevenueisshownbelow.Theinformationhas
been taken from the latest report published by Interlink Insurance & Reinsurance Brokers Pvt Ltd.
Premiumsforthepreviousyearareshownforthepurposesofcomparison.Figureshavebeenconverted
intoUSDattheaverageannualrateofexchangein2009.
Insurance Companies
=================================================================================
Update April 2011
=================================================================================
Formoreinformationoninsurancecompanies,seetheMarketParticipantssectionofthisreportunderthe
headingInsuranceMarketOverview.
Rank
Insurance
Companies
Written Premiums
2010
2010
Growth
Market Share
Written
Premiums
INR
2009
INR mn
USD mn
NewIndia
70,991.40
1,560.25
9.97%
18.10%
64,557.90
UnitedIndia
52,390.50
1,151.44
21.96%
13.36%
42,958.00
Oriental
48,546.80
1,066.96
19.05%
12.38%
40,779.00
National
46,459.70
1,021.09
8.61%
11.84%
42,777.70
ICICILombard
32,950.60
724.19
(3.14)%
8.40%
34,020.30
BajajAllianz
24,823.30
545.57
(5.23)%
6.33%
26,192.90
Reliance
19,796.50
435.09
3.38%
5.05%
19,148.80
AIC
15,204.00
334.15
82.42%
3.88%
8,334.40
IFFCOTokio
14,578.30
320.40
6.10%
3.72%
13,740.60
10
StarHealth
9,616.40
211.35
88.61%
2.45%
5,098.60
11
HDFCErgo
9,154.00
201.19
169.86%
2.33%
3,392.10
12
RoyalSundaram
9,131.00
200.68
13.66%
2.33%
8,033.60
13
TATAAIG
8,538.00
187.65
3.63%
2.18%
8,239.20
14
ECGC
8,130.00
178.68
9.17%
2.07%
7,446.80
15
Cholamandalam
7,848.50
172.49
14.50%
2.00%
6,854.30
16
ShriramGeneral
4,169.30
91.63
266.50%
1.06%
1,137.60
17
FutureGenerali
3,766.10
82.77
101.95%
0.96%
1,864.90
18
BharatiAXA
3,108.20
68.31
990.60%
0.79%
285.00
19
UniversalSompo
1,892.70
41.60
527.97%
0.48%
301.40
20
ApolloMunich
1,146.60
25.20
n/a
0.29%
n/a
21
RahejaQBE
13.20
0.29
n/a
0.00%
n/a
India-Non-Life(P&C)
INR mn
197
AXCO2011

Rank
22
Insurance
Companies
Written Premiums
2010
2010
Growth
Market Share
Written
Premiums
INR
2009
INR mn
USD mn
MaxBupa
1.30
0.03
n/a
0.00%
INR mn
n/a
MARKET
TOTAL
392,256.40
8,621.02
17.03%
100.00%
335,163.10
Source: Interlink
Forpreviousyears'data,pleasevisitAxcoGlobalStatistics.
India'sonlyprofessionalreinsurancecompanyisthestate-ownedGeneralInsuranceCorporation(GICRe)
whosegrosspremiumincomein2005-06wasINR48.81bn(USD1.18bn)(INR51.22bn(USD1.16bn)in
2004-05).
GIC explains in its Annual Report 2005-06 that figures for that year are for the period April 2005 to
December2005only.Thecorporationstatedthat"foracomparisonoffiguresof2004-05and2005-06,an
"as if" premium accretion for the last quarter (January 06 to March 06) was estimated with a view to
measuretop-linegrowthoverlastyear.ProjectionsforJanuary06toMarch06baseduponthetrendsof
premiumaccretioninJanuary05toMarch05wouldindicateagrowthofaround17%yearonyearbasis.
The percentage growth has been arrived at after moderating the same in view of changed market
conditionsascomparedtothecorrespondingperiodduringlastyear."
Grosspremiumin2007-08wasINR93.16bn(USD2.14bn)comparedwithINR74.04bn(USD1.79bn)in
2006-07.
InitsAnnual Report 2007-08thecorporationreportedthatintheyearunderreview,"Thegrosspremium
increasedby26%andtheearnedpremiumincreasedby37%.Howeverowingtoachangeinaccounting
policy, the domestic business figures include five quarters figures. To put the figures in perspective, four
quartersareanalysedandthegrosspremiumofINR8,020croresorINR80.2bnshowsagrowthof8.3%
andearnedpremiumofINR6,641croresorINR66.64bnshowsagrowthof26.2%.Theunderwritingresult
shows an overall loss of INR 927 crores or INR 9.27bn but on the basis of four quarters, the result is a
profitofINR93croresorINR930mn.IncomefrominvestmentsisINR2,031croresorINR2.031bnwhilstit
wasINR1,849croresor1.849bnforthepreviousyear.Thusfortheyear2007-08anoverallrevenueprofit
ofINR360croresorINR3.6bnisrecorded.TheprofitbeforetaxisINR1,067.30croresorINR10.673bn.
The ratio of total business expenses to the earned premium ie the combined ratio stood at 112.8%, but
basedonfourquartersfiguresitis99%."
In2008-09thegrosspremiumwasINR80.61bn(USD1.67bn),adropof13.48%whencomparedwiththe
previousyear.Thisispartlyduetoadropinreinsurancepremiumscededbyinsurersinthelocalmarket,
where India's only professional reinsurance company is the state-owned General Insurance Corporation
(GICRe).
FormoreinformationaboutthereinsurancemarketseetheReinsurancesectionofthisreport.
India-Non-Life(P&C)
198
AXCO2011
Industry Organisations
Internationaldiallingcode:+0091
Majorcity/towncodes:
Mumbai(Bombay)-22
Hyderabad-40
General Insurance Council
5thFloor,RoyalInsuranceBuilding
14JTATARd
Churchgate
Mumbai400020
Tel:22817511
Fax:22817515
www.gicouncil.in
Indian Institute of Insurance Surveyors and Loss Assessors
5thFloor,ParishramBhavan
BasheerBagh
Hyderabad500004
Tel:443137037(Secretary'stelephonenumberinTrichy)
www.iiisla.org
Insurance Brokers Association of India
MakarBhavan1
1SirVithaldasThackerayMarg
Mumbai400020
Tel:228.46544
www.ibai.org
Insurance Institute of India
PlotnoC46GBlock
NearDhirubhaiAmbaniInternationalSchool
BandraKurlaComplex
Mumbai400051
Tel:26544200
www.insuranceinstituteofindia.com
Insurance Ombudsman
JeevanSevaAnnexe
SVRoad
Santacruz(W)
Mumbai400054
Tel:26106928
Fax:26106052
OtherOmbudsmanofficesaresituatedthroughoutIndia.
Insurance Regulatory & Development Authority (IRDA)

ParisramaBhavan
India-Non-Life(P&C)
Basheerbagh
199
AXCO2011
Insurance Companies
Chennai(Madras)-44
Gurgaon-124
Kolkata(Calcutta)-33
Mumbai(Bombay)-22
NewDelhi-11
Pune-20
Agriculture Insurance Co of India Ltd
13thFloorAmbaDeep
KasturbaGandhiMarg
ConnaughtPlace
NewDelhi110001
Tel:46869800
Fax:46869815
www.aicofindia.org
Apollo DKV Insurance Co Ltd
10thFloorTowerB,BuildingNo10
DLFCybercity-DLFCityPhaseII
Gurgaon
Hayana122001
Tel:4584333
Fax:4584111
www.apollodkv.co.in
Bajaj Allianz General Insurance Co
GEPlaza
AirportRd
Yerawada
Pune411006
Tel:30587888
Fax:40111502
www.bajajallianz.co.in
Bharti AXA General Insurance Co Ltd
BotwalaChambers
India-Non-Life(P&C)
200
AXCO2011
PMMehtaRoad
Mumbai400001
Tel:40028515
Fax:40028513
www.bharti-axagi.co.in
Cholamandalam MS General Insurance
DareHouse
No2NSCBoseRoad
Chennai600001
Tel:18002005544(tollfree)
Fax:30445550
www.cholainsurance.com
Export Credit & Guarantee Corporation of India Ltd
ExpressTowers
NarimanPoint
Mumbai400021
Tel:56590500
Fax:56590517
www.ecgcindia.com
Future Generali India Insurance Co Ltd
001DeltaPlaza
414VeerSarvarkarMarg
Prabhadevi
Mumbai400025
Fax:40976868
www.futuregenerali.in
HDFC Ergo General Insurance Co Ltd
LeelaBusinessPark
AndheriKurlaRoad
Andheri(East)
Mumbai400059
Tel:66383600
Fax:66383699
India-Non-Life(P&C)
201
AXCO2011
www.hdfcergo.com
ICICI Lombard General Insurance Co
ZenithHouse
KeshavraoKhadyeMarg
Mahalakshmi
Mumbai400034
Tel:24906805
Fax:24914634
www.icicilombard.com
IFFCO Tokio General Insurance Co Ltd
IFFCOTower
Plot3,Sector29
Gurgaon
Haryana122001
Fax:2577923
www.itgi.co.in
L&T General Insurance Co Ltd
601-02TradeCentre
BandraKurlaComplex
Bandra(East)
Mumbai400051
Tel:61230000
Fax:61230145
www.ltinsurance.com
National Insurance Co Ltd
3MiddletonStreet
Kolkata700071
Tel:22831705
Fax:22831717
www.nationalinsuranceindia.com
New India Assurance Co Ltd
87MahatmaGandhiRoad
Mumbai400001
Tel:22708100
India-Non-Life(P&C)
202
AXCO2011
Fax:22622355
www.newindia.co.in
Oriental Insurance Co Ltd
OrientalHouse
A-25/27AsafAliRoad
NewDelhi110002
Tel:43659595/23279221
Fax:23287192
www.orientalinsurance.org.in
Raheja QBE General Insurance Co Ltd
Commerz10thFloor
InternationalBusinessPark
OberoiGardenCity
WesternExpressHighway
GoregaonEast
Mumbai400063
Tel:42313888
Fax:42313777
www.rahejaqbe
Reliance General Insurance Co Ltd
570NaigaumCrossRoad
NexttoRoyalIndustrialEstate
Wadala
Mumbai400031
Fax:30479650
www.reliancegeneral.co.in/insurance/home.html
Royal Sundaram Alliance Insurance Co Ltd
45/46WhitesRoad
Royapetah
Chennai600014
Tel:30479602
Fax:30479650
www.royalsundaram.com
SBI General Insurance Co Ltd
India-Non-Life(P&C)
203
AXCO2011
TheILandFSFinancialCentre
PlotNoC22,GBlock
BandraKurlaComplex
BandraEast
Mumbai400051
www.sbigeneral.in
Shriram General Insurance Co Ltd
GreamsDugar
149,GreamsRoads
Chennai600006
Tel:3220896
Fax:2770426
www.shriramgi.com
Star Health & Allied Insurance Co Ltd
No1NewTankStreet
VlluvarkottamHighRoad
Nungambakkam
Chennai600034
Tel:28260053
Fax:28260062
www.starhealth.in
TATA AIG General Insurance Co Ltd
NicholasPiramalTower
PeninsulaCorporatePark
GKMarg
LowerParel
Mumbai400013
Tel:66699697
Fax:66546464
www.tata-aig.com
United India Insurance Co Ltd
UnitedIndiaHouse
24WhitesRoad
Chennai600014
Tel:28520161
Fax:28523825
India-Non-Life(P&C)
204
AXCO2011
www.uiic.co.in
Universal Sompo General Insurance Co Ltd
310-311TradeCentre
Opp:MTNLBuilding
BandraKurlaComplex
Bandre(E)
Mumbai400051
Tel:40287777
Fax:49287781
www.universalsompo.com
Chennai(Madras)-44
Kolkata(Calcutta)-33
Mumbai(Bombay)-22
Asia Capital Reinsurance Group Pte Ltd
IndiaLiaisonOffice
BandraKurlaComplex
Bandra(East)
Mumbai400051
Tel:67419526
Fax:67103195
www.asiacapitalre.com
General Insurance Corporation of India (GIC Re)
Suraksha
170JTATARoad
Churchgate
Mumbai400020
Tel:22867166/22833452
Fax:22899643
www.gicofindia.com
Hannover Re Consulting Services India Pvt Ltd
215AtriumCWing
Unit616,6thFloor
Andheri-KurlaRoad
AndheriEast
Mumbai400069
Tel:61380808
Fax:61380810
www.hannover-re.com
Munich Reinsurance Co Representative Office

India-Non-Life(P&C)
ITCSonarBanglaSheraton
205
AXCO2011
Captive Managers
TherearenocaptivemanagersIndia.
Intermediaries
Mumbai(Bombay)-22
NewDelhi-11
Insurance Brokers/Consultants
Aon Global Insurance Brokers Pvt Ltd
302DalamalHouse
JamnalalBajajMarg
NarimanPoint
Mumbai400021
Tel:66560505
Fax:66560506
www.aon-global.com
J B Boda Insurance Brokers Pvt Ltd
MakerBhavanNo1
SirVithaldasThackereyMarg
Mumbai400020
Tel:66314949
Fax:22623747
www.jbboda.net
K M Dastur Reinsurance Brokers Pvt Ltd
CambataBuilding
42MaharshiKarveRd
Mumbai400020
Tel:22855855
Fax:22040085
Howden Insurance Brokers India Pvt Ltd
TheBombayDyeingAdministrativeOffice
GroundFloor,PandurangBudhkarMarg
Worli
Mumbai400025
Tel:66558888
Fax:66548833
www.howdenindia.com
HSBC Insurance Brokers (India) Pvt Ltd
52/60MahatmaGandhiRoad
Fort
Mumbai400001
Tel:56356789
India-Non-Life(P&C)
Fax:5635995
www.hsbc.co.in
206
AXCO2011
Reinsurance Brokers
Aon Global Insurance Brokers Pvt Ltd
302DalamalHouse
JamnalalBajajMarg
NarimanPoint
Mumbai400021
Tel:66560505
Fax:66560506
www.aon-global.com
M B Boda Reinsurance Brokers Pvt Ltd
MakerBhavanNo1
SirVithaldasThackereyMarg
Mumbai400020
Tel:56314901
Fax:Notknown
www.jbboda.net
K M Dastur Reinsurance Brokers Pvt Ltd
CambataBuilding
42MaharshiKarveRd
Mumbai400020
Tel:22855855
Fax:22040085
Howden Insurance Brokers India Pvt Ltd
9thFloor
ExpressTowers
NarimanPoint
Mumbai40021
Tel:24983423
Fax:66548833
www.howdenindia.com
HSBC Insurance Brokers (India) Pvt Ltd
52/60MahatmaGandhiRoad
Fort
Mumbai400001
Tel:56356789
India-Non-Life(P&C)
207
AXCO2011
Fax:5635995
www.hsbc.co.in
Interlink Insurance & Reinsurance Brokers Pvt Ltd
501SaiInfoTech,FifthFloor
PatelChowk
RBMehtaRoad
Ghatkopar(East)
Mumbai400077
Tel:67340000
Fax25012259
www.interlinkre.com
Marsh India Insurance Brokers Pvt Ltd
1201-02Tower2
OneIndiabullsCentre
JupiterMillsCompound
SenapatiBapat
ElphinstoneRoad(West)
Mumbai400013
Tel:66512900
Fax:66512901
www.marsh.com
PRMAN Reinsurance Brokers Pvt Ltd
113BhaveshwarComplex
NearVidyaviharRailwayStation
Vidyarihar(W)
Mumbai400086
Tel:25140564
Tower Insurance & Reinsurance Brokers (India) Pvt Ltd
519MakerChambersV
NarimanPoint
Mumbai400021
Tel:22844364/22835359
Fax:22040032
www.towerbrokerindia.com
Willis India Insurance Brokers Pvt Ltd
India-Non-Life(P&C)
208
AXCO2011
111,FreePressJournalMarg
NarimanPoint
Mumbai400021
Tel:66592500
Fax:66592501
www.willis.com
Loss Adjusters
Mumbai(Bombay)-22
NewDelhi-11
J B Boda Surveyors Pvt Ltd
MakerBhavan1
SirVithaldasThackerseyMarg
Mumbai400020
Tel:22624949
Fax:22623747/2625112
M/S Kaypsens
Flat211,PocketV
MayurViharPhase
NewDelhi11091
Tel:2259908
CP Mehta & Co
4D/BEdenaBuilding
97MaharashiKarveRoad
Mumbai400020
Tel:22013576
Fax:22051430
Puri Crawford & Associates India Pvt Ltd
714AshokaEstate
BarakhambaRoad
ConnaughtPlace
NewDelhi110001
Tel:51515657/60
Fax:51515661
www.puricrawford.com
Richards Hogg International (India) Ltd
319MakerChambersV
221NarimanPoint
Mumbai400021
Tel:22835851/2835852
Fax:22835951
India-Non-Life(P&C)
BP Shah & Associates
209
AXCO2011

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India Full Axco Report 2011

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Country Map

Map of the Area

INSURANCE MARKET REPORT

INDIA: NON-LIFE (P&C)

Map of the Area

General Country Information

Population and Demographic Trends

Politics and the Economy

Current Political Situation

Currency and Exchange Control

Supervision and Control

Non-Admitted Insurance Regulatory Position

Company Registration and Operating Requirements

Insurance Market Overview

The Market Today

Local Reinsurance Market

Local Reinsurance Arrangements

Multinationals, Captives, ART and Risk Management

A.R.T. & Risk Management

India - Non-Life (P&C) Report

Earthquake and Other Geological Hazards

Construction and Prevention

Industrial and Commercial

Construction and Machinery Breakdown

Construction and Erection all Risks

Workers' Compensation and Employers' Liability

General Third Party

Directors' and Officers' Liability

Pollution and Environmental Liability

Financial and Professional Risks

Surety, Bonds and Credit

Marine, Aviation and Transit

Personal Accident and Travel

Appendix No 1 - Market Statistics

Insurance Supervisor's Report

Non-Life Market Totals

India - Non-Life (P&C) Report

India - Non-Life (P&C) Report

Map of the Area

New statistical information may have been included in the appendices.

General Country Information

Source: IMF and EIU

General Country Information

India's Congress Party was overwhelmingly re-elected in general elections conducted

General Country Information

General Country Information

General Country Information

General Country Information

General Country Information

Population and Demographic Trends

General Country Information

Rate of natural increase

Source: UN Population Division

Infant mortality rate

General Country Information

Infant mortality rate

Source: UN Population Division

Source: UN Population Division

General Country Information

Source: UN Population Division

Major Causes of Death

General Country Information

Other Major Areas/Cities

General Country Information