Kathmandu: Global re-insurers are all set to increase their insurance premium rate for re-insurance support amid the claims skyrocketed due to the Covid19 pandemic and natural disasters. The world’s largest re-insurers are worried about their lower profits and even losses.
According to a survey conducted by international credit rating agencies, term re-insurance premium fees are expected to be relatively expensive in 2022. Similarly, rating agencies have mentioned that the re-insurance fee of life insurance will be more expensive than now. Along with the increase in re-insurance fees, it will also have an effect on the insurance premiums that the general public has to pay for insurance. Endowment plan’s premiums remain constant during the insurance period. But new life insurers may have to pay relatively expensive premiums.
Insurance companies have a practice of transferring excess risk to re-insurance companies. In re-insurance, the companies receive re-insurance fee(premium) for taking risks from insurance companies. According to the Indian news media the Economic Times, Indian insurers estimate that the premium will increase by 20 to 40 percent in 2022. The insured of small companies will be most affected as the ability of small insurers are poor to negotiate with the re-insurer.
In Nepal too, it has been estimated that 60 percent of the total death claims in recent times have been seen due to Covid19 pandemic.
According to the data published by Insurance Board for the fiscal year 2077/78(2020-21), 19 life insurance companies have paid claims of Rs. 35.45 billion in one year. Net claim payments increased by 67.44 percent as compared to previous FY 2076/77(2019-20). According to insurers, the increase in death claims due to the Covid19 pandemic has had an impact on claim payments. As the share of profits of re-insurance companies declines due to increased claims payments, re-insurers have already started to refuse to provide re-insurance support to a numbers of new life insurance plans.
Insurance expert Bhoj Raj Sharma says that even if companies increase re-insurance fees in foreign re-insurance, its effect will not be seen immediately in Nepalese insurance market. He argues that if the rate goes up or down, the impact will be observed only after the end of current fiscal year. Most insurance companies have already signed annual re-insurance treaty for the current FY. Nepali insurance companies do not pay much attention to this as the rates in the international re-insurance market keeps fluctuating. Sharma’s analysis is that if the rate changes, it will be known only after mid July 2022.
It have been observed that the insurance plan rejected by the company in foreign re-insurers is executed through the support of Nepal Re-insurance. Most re-insurance services for life insurance companies in Nepal have been provided by Hanover Re, Scor Se and Trust Re.