Oriental taps global reinsurance marketFriday 16, June, 2006 Breaking out of national borders, public sector non-life insurer Oriental Insurance Company Ltd (OICL) has entered the international reinsurance market and is earning premiums in foreign currency.This is the first time since nationalisation that the primary non-life insurers are beginning to foray the international markets to provide reinsurance covers. So far only the national reinsurer, General Insurance Corporation Ltd, has participated in the international reinsurance markets. The OICL Chairman and Managing Director, Mr M. Ramadoss, confirmed the company's international reinsurance foray. He said: "We see it as an extension of our business. Since the opportunity existed, we took advantage of it." He added the focus area was in the SAARC (South Asia Association for Regional Cooperation), South East Asia and Latin America. Such support would also include primary insurance companies in Pakistan and Bangladesh, who are members of the SAARC.In all these countries, OICL has participated to provide the reinsurance support on a Fac Re basis. Mr Ramadoss said, "Our focus is the aviation sector." OICL has provided reinsurance support to Maldives Aviation, Royal Nepal Airlines and an airport in Brazil. Mega risk covers too
Asked if exchange rate volatility would impact OICL's liabilities in providing cross border covers, he said the company already had foreign currency accounts. Besides, the inward premiums were all in foreign currencies. Sources said most primary insurers in these regions preferred Indian companies for reinsurance support because of large-scale defaults from Asian and European reinsurers. Some of the companies, the sources said, accepted the premiums, but failed to honour commitments. This was on account of low capitalisation and losses in investments. Some Asian and European reinsurers had also become "fly by night" operators, the sources added. As a result, even some London-based primary insurers have also begun approaching Indian insurers for participation in big ticket reinsurance arrangements. Indian companies' interest in the international markets was also driven by the Insurance Regulatory and Development Authority's fiat to improve domestic retention capacities.This was intended to contain foreign exchange outflows on account of the reinsurance premiums. Providing international reinsurance supports implied inward foreign exchange flows. Large capitalisation
This rating, by A M Best's definition is "very good" and OICL falls in the financial size of $1-$1.25 billion in the rating agency's category of insurers. |