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Climate fears boost demand for profit loss covers

Supriya Rathi, Wholetime Director, Anand Rathi Insurance Brokers shares her perspective on the impact of political, environmental & socio-economic factors on the insurance industry:

Climate fears boost demand for profit loss covers

Ravi Lalwani: Infrastructure development is booming across India, whether it is highways or airports or solar farms, or others. What new nature and man-made risks are these projects looking to insure?

Supriya Rathi: Climate change has caused large property damage losses in recent years for infrastructure developers in India and abroad. In addition to the damages to the project works, companies have suffered losses on account of delayed completion of projects due to physical damage losses and delayed construction works because of climate aberrations. We see increasing demand for advance loss of profits insurance and parametric insurance covers given the increased exposures to climate change. These insurance policies cover financial losses suffered by companies on account of delayed completion of projects.

There is also an increased uptake on defects liability (DL) covers for 10 years plus, for large infrastructure projects. Given treaty restrictions of insurers to cover long-term defects within the contractor’s all-risk policies, we see demand for standalone long-term project-specific defects liability insurance covers.

As infra companies increase their adoption of automation, sensors, virtual reality, and cloud-based platforms for managing the supply chains and improving safety at their project sites, we also see demand for cyber insurance policies for this sector.

At Anand Rathi Insurance Brokers Ltd. (ARIBL), our experts work with infra companies, contractors, and design engineering consultants to implement innovative insurance and risk management solutions for India’s large and highly complex infra-construction projects.

With the government’s Make in India initiative, what increase are you seeing in the insurance business from manufacturing? Which industries and geographies are you focusing upon?

Make in India initiative has led to robust growth in the manufacturing & IT sectors. This has encouraged various multinational companies and foreign investors to make investments in India and boost their business by manufacturing their products in the country. Commercial insurance products such as property, engineering, marine & liability insurance which cater to the manufacturing sector are growing steadily at around 15% CAGR. Anand Rathi Insurance Brokers is already present in more than 40 locations in India and is well poised for catering to the growing demand of this sector. We are adding resources and working on designing new insurance products and solutions for this segment. In the manufacturing sector, our focus is on the renewables sector, infrastructure projects, logistics and warehousing, sugar, and chemical industry.

What is your assessment of the impact of the land sinking happening in and around Joshimath? What do you see as opportunities for insurance companies and brokers?

After the recent Joshimath land sinking crisis which damaged around 700 buildings, parts of Jammu, as well as Himachal, also reported similar incidents of landslides/land sinking and damages to residential buildings. Due to the massive deforestation, landslides have become a common feature in these youngest fold mountains. Unplanned and uncontrolled developmental work, mindless commercialization of the terrain, and the burgeoning of religious/leisure tourism in these areas have led to the devastation.

We at ARIBL are working with disaster management teams of state governments for innovative insurance and risk management solutions. We have suggested some long-term cost-effective solutions to cater to this emerging catastrophic risk. Businesses should revisit their exposures in these areas to adequately cover their property damage and business risk (loss of profit). Governments/ insurers must also encourage schemes to adequately cover residential units through comprehensive home insurance schemes.

Share an overview of your cyber insurance business?

We at Anand Rathi think that there are a few key elements of assistance a broker should provide for putting in place a cyber risk insurance policy:

  • Risk matrix and evaluation of systems security and corporate maturity to risk
  • Measures to improve risk management and residual risks
  • Mapping the residual risks on a model to arrive at an estimation of value at risk
  • Post-event claims support with access to forensics.

We have built this infrastructure to provide a robust value proposition for clients. The value-at-risk reports developed by us internally give a good foundation to clients to arrive at their indemnity limits for taking cyber risk insurance policies and additionally provide a risk perspective of the vulnerabilities faced by them. We also actively engage with a panel of breach response vendors who assist at the time of cyber incidents to our clients, as well as provide value-added services including cyber audits, risk reduction measures, and putting in place better cyber security protocols.
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