Global Reinsurance Solutions
Newsletter of GIC Re Your Partner in Risk GIC ReNEWS ISSUE 03 VOLUME 01 June 2008 For Private Circulation Only Highlights
I S S U E 03 VOLUME 1 June 2008 Editor’s Thoughts...
To keep with the growing times, and sustain the growth rate, change and adaptation become a constant feature for an organization. Management Consultants Deloitte have recommended a business strategy and internal restructuring plan which will help put GIC Re on a rapid growth path in near future. Moscow International Reinsurance Congress March 2008 GIC Re is reaping the benefits of implementing ERP solutions SAP with its inherent best pratices and strong Business Warehouse features. Other technology initiatives like DMS will be enabling factors for growth.
The Indian insurance industry had seen rapid development under the leadership of CS Rao who laid down office as Insurance Regulator in April. Mr. J Hari Narayan the successor has an onerous task on his hand at this juncture when the de-tarification has thrown the market players into an intense competition. It is imperative for the players to develop “ underwriting “ skills based on empirical and actuarial skills, and build up database. GIC Re pledges to strengthen the hands of the 2nd MENA CEO Insurance Summit, Dubai, June 2008 regulator in playing the “development ” role for the industry.
Readers would be happy to go through write ups on some of the topical subjects like oil and petroleum, GIC Re & Hannover Re Tie up on Life reinsurance in India, participation of GIC Re in meetings, seminars and conferences as also regular features such as Employees Corner and Industry News.
Awaiting your feedback as usual
Exchange of Documents after signing Cooperation Raghunath Agreement between GIC Re and Hannover Re
Editor’s Thoughts ...... 1 Parliamentary Committee on Official Language ...... 11 Co-operation Agreement ...... 2 Employees Corner ...... 12 Industry News ...... 4 Focus ...... 13 India Briefing at Llyod’s London..... 6 Recipe ...... 14 Aviation Underwriting ...... 8 Glossary ...... 15 Crude Oil ...... 10 GIC Re meeting with UAE market at Dubai June 2008 Feedback ...... 16 Inside ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS EVENTS
GIC Re signs Cooperation Agreement with Hannover Re
GIC Re and Hannover Re, the 5th largest global life reinsurance company have come together to develop life reinsurance From the CMD’s Desk business in India. At a glittering ceremony held in Mumbai on the 19th of June 2008 in Globalisation and diversification are the order of the the presence of the day. No longer can an organisation remain bound to Hon’ble Union Minister of its ancient moorings and aspire to keep pace with the State for Finance, Mr. fast changing world. Insurance sector in the country Pawan Kumar Bansal, has also undergone a sea change since liberalisation the two reinsurers signed in 2000 and is still evolving. a Cooperation Subsequently the sector has been witness to several Agreement. reforms. Detariffication, development and marketing of new products both in life and non-life areas and Union Minister of State for Finance The goal of the agreement reduction of obligatory cessions to GIC Re are some Mr. Pawan Kumar Bansal addresses the of cooperation, which is of them. Adaptation to the changing environment is gathering. initially planned for a the key to survival and progress. We, at GIC Re are period of five years, is to jointly build up a profitable life also adapting to the changing environment. reinsurance portfolio with strong growth potential in the highly The Indian life insurance industry is today on a rapid promising Indian market. The two organisations will work for growth path. Today we have 19 life insurance compa- joint development, marketing and underwriting of life reinsurance nies in the country compared to just one in the pre- business in India. The agreement signing ceremony was graced liberalisation days. The awareness and penetration by His Excellency Mr. Walter Stechel, Consul-General of about life insurance has shown remarkable upswing. Germany in Mumbai. However, life reinsurance is concentrated in the hands Mr. M Ramaprasad, General Manager, GIC Re and Mr. Wolf S of few reinsurers. To participate in the growing market of life reinsurance after our excellent track-record in Becke, CEO, Hannover Life Re signed the agreement and the area of non-life reinsurance, we have signed an exchanged the documents. agreement of cooperation with the German reinsurer, Hannover Re for the development of life reinsurance in the Indian market. The Indian market has large expectations from us for life reinsurance support and I have large expectations from you, colleagues to do justice to the expectations of the industry. Starting with the upgradation of repre- sentative offices abroad into full fledged branches, this agreement of cooperation with Hannover Re is yet another step in our journey of globalisation and diver- sification. There will be more such steps in the days ahead to enable us to emerge as a preferred reinsurer not only in SAARC and Africa but also globally. Yogesh Lohiya, Chairman cum Managing Director, GIC Re welcomes the distinguished gathering. Seated on the dais (L-R) G. Prabhakara, Member (Life) IRDA, Union Minister of State for Finance P K Bansal, Yogesh Lohiya Walter Stechel, Counsel General of Germany, Wilhelm Zeller, CEO Hannover Re, Wolfe S Becke, CEO Hannover Life Re.
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Earlier Mr. Bansal addressing the distinguished gathering said that this agreement was one step further in the direction of GIC Re moving on to become a global reinsurance company. Walter Stechel, Counsel General of Mr. G. Prabhakara, Germany addresses the audience Member (Life), Insurance Regulatory & Development Authority of India (IRDA) was the guest of Honour at the agreement signing ceremony. He M Ramaprasad, General Manager GIC Re and Wolfe S Becke, CEO Hannover Re sign the Cooperation Agreement. congratulated GIC Re on reaching this agreement.
Mr. Stechel also spoke on the occasion and said the This initiative also augurs well for the Indian life insurance Agreement of Cooperation was an indication of the growing industry which has seen an upward growth curve since relations between Germany and India. liberalization of the sector in 2001 with the new life business premium figure at Rs.93,000 crores, an increase of 23% over GIC Re Chairman cum Managing Director Mr. Yogesh Lohiya the previous year. This exciting market promises to be more said the synergy arising from the agreement of cooperation happening in times ahead with the entry of this new partnership. would provide the Indian life Insurance industry with a competent global life reinsurance alternative, whilst developing this The agreement signing ceremony was attended by a large expertise within the country. number of CEOs, Chairmen and senior officials of life and non- life insurance companies of the country. Media representatives Mr. Becke said that with this agreement GIC Re - which has from the print and electronic media were also its roots in non-life reinsurance - will profit from the German present on the occasion. The event received reinsurer’s long-standing expertise in life reinsurance. The two an excellent coverage in the national and companies will operate in the Indian market as equal partners international press. and will underscore their cooperation with joint marketing activities. ...Anoop Khanna
GIC Re and Life Reinsurance GIC Re has been carrying out reinsurance business since its inception in 1972. It has been the dominant reinsurer in the Indian market in the non-life sector. Subsequent to liberalization of the insurance industry in 2001, GIC Re was designated as the national reinsurer and now carries on reinsurance business alone. Also, GIC Re had to discontinue its direct business operations in core sectors like Aviation and Agriculture. Hence, new areas were explored and in 2002 a life reinsurance department was set up in GIC Re. The new department began operations in 2003. In the subsequent years, as there were globally more experienced players in the market, significant market share could not be garnered. The reinsurance premium outgo from the life insurance market in the country is around Rs 200 crores for the Yogesh Lohiya (right) in conversation with Walter Stechel, Counsel year 2006-07 and GIC Re’s share is around 2%. General of Germany (centre) and Wilhelm Zeller, CEO Hannover Re (left).
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Indian Insurance Industry - April - June 2008
India Rising Story has taken a beating, investment cap in insurance should (IRDA) to operate in the life insurance or so it seems. Industrial production is lead to still more significant market space. The company is a joint venture on a slide and surging inflation is a share being captured by private sector. between Aegon, a global life insurance cause for concern. Crude oil crossing Business Written 2007-08-Life and pension company and Religare, one USD 140 and heading northwards is not Insurance: of India’s leading integrated financial going to make things easy for a country As regards life insurance business, for services institutions. which depends significantly on oil the year 2007-08, based on unaudited Market Development: imports. Nonetheless, it needs to be results for first year of premium The insurance penetration in corporate remembered that the India Story is a underwritten, premium underwritten grew segment is already good and unlikely long-term story and such hiccups can by 23.3% year on year from INR to offer significant growth opportunities. be expected. Index of Industrial 75,406.52 crore to INR 92,988.70 crore. The insurers’ strategies therefore have production which fared badly during the LIC registered a growth of 5.8% with tended to shift to underserved first quarter of 2008 appears to have market share of 63.6% while private segments. Management guru C K recovered some ground in April but one sector grew at 73.6% on a relatively Prahlad in his popular book, ‘The has to wait longer to confirm the trend smaller base with a market share of either way. Fortune at the Bottom of the Pyramid: 36.4%. This compares with previous Eradicating Poverty Through Profits’ Worldwide consumption patterns in year market shares of 74.2% and 25.8% has pointed out the way for the developing and industrialized countries respectively for 2006-07. Thus, private corporates to grow synergistically. This indicate that weight of oil consumption sector has captured from LIC a share strategy would however, require in the consumer basket progressively of 10.5% during 2007-08. This development of viable distribution gets reduced with economic growth. compares with a market share gain of Thus, while the fear of inflation owing 2.7% year-on-year during 2006-07 by channels and consumer awareness and to oil prices is not unreal, quite possibly LIC and loss of 6.8% during 2005-06 confidence. Given the hierarchy of it is exaggerated. While growth in over respective previous years. financial needs, life insurance can be agricultural sector remains a matter of expected to lead this foray before concern, the service sector apparently Mr C S Rao completed his tenure as general insurance in the Indian rural is more than making up for the shortfall. Chairman of Insurance Regulatory and segment. Development Authority of India (IRDA), and The reforms momentum, if any cannot Cashless settlement systems be expected to contribute to growth as supperannuated on 14th May 2008. Mr J Harinarayan, former Chief Secretary of the employed by insurance players for the general elections approach. On the Andhra Pradesh Government has taken health and automobile insurance claims other side, the Central Pay Commission over as the new Chairman of IRDA. along with outsourcing of claims recommendations if implemented servicing are changing the rules of the together with reduced income tax rates Market Entries: game. Brokers and web based should help boost consumption. insurance portals are going to play the Business Written 2007-08- Canara HSBC Life Insurance, a role of aggregators i.e., they aggregate General Insurance: partnership between Canara Bank, quotes from across companies and offer As per unaudited accounts for non-life Oriental Bank of Commerce and HSBC the best rates to individuals. On-line industry for 2007-08, gross premium Insurance (Asia Pacific) Holdings purchase of insurance is on the rise and underwritten grew by 12.63% year on Limited (INAH), Hong Kong has begun year from INR 24,975.35 crore to operations, making a total of 19 players premium payment through mobile INR 28,130.68 crore. Public sector in life insurance segment. phones is now possible. This is going companies underwrote a gross premium Shriram General Insurance Company to lead to commoditization of personal of INR 16,899.49 crore registering a Limited, a joint venture between Shriram lines of insurance products, a trend growth of 3.94% year on year against Financial Services Holdings Pvt Ltd., which will infect commercial lines that of INR 11,231.19 crore with a India and Sanlam Limited, South Africa shortly thereafter. growth rate of 28.85% for private sector. has been registered as a General With IRDA now allowing participation of Thus the market share of public sector Insurer, taking the number of players in insurance company promoter to float companies went down from 65% to 60% non-life insurance segment to 19. insurance broking operations in line with and correspondingly, private sector State Bank of India and Insurance the prevalent regulation in some growing in market share from 35% to Australia Group are in the process of jurisdictions, despite the stipulation 40%. This compares with 8.3% market creating a general insurance joint regarding arm’s length operations and share lost by public sector companies venture in India in the later part of this avoidance of over-concentrated trading to private sector companies in 2006-07 year. Aegon Religare Life Insurance relationship, the scenario will become and 6.3% in 2005-06 over respective Company has received the initial more competitive. previous years. Entry of some new approval - R1 licence from the Insurance private players along with de-tariffing Regulatory & Development Authority ...Hitesh Joshi and impending relaxation in foreign
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India Briefing in Lloyd’s at London
Of late Lloyd’s of London has been evincing a keen interest in opportunities available for it in the Indian Insurance Market. Lloyd’s representatives have been interacting with a cross section of the market to raise awareness about the opportunities available and help understand and refine the strategies. As a part of this initiative Lloyd’s India Briefing was held on 16th May, 2008 at the Lloyd’s building in London. We bring you a report of the event compiled by Mr. Sanjay Mokashi, Deputy Manager, GIC Re London office...... Editorial Desk
Mr. Anil Sant, Chief Manager, GIC Re, first presentation was by Mr. Anil Sant UK Branch, Mr. Anand Kumar, UK of GIC Re. Representative of ICICI Lombard Mr. Sant’s presentation provided the 97,998 million in 2000-2001 and has General Insurance Company Ltd. and reinsurer’s perspective of the current further increased to INR 281,306 Mr. Mohan Lunawat, Head of the trends in the Indian General Insurance Corporate Division, Life and General million in 2007-08. Market. His presentation elaborated Insurance Brokers Pvt. Ltd were the There are currently 18 players in the on the Indian economy, the Indian three speakers at the Lloyd’s India General Insurance Market in India with general insurance market and the Briefing. They represented the three current trends in the general insurance two more entrants ready to start their practitioners from the Indian Market – operations. The share of private industry there. the Reinsurer, the Insurer and the players has rapidly increased from a Presentation by GIC Re Intermediary. Over fifty participants modest 14% in 2003-04 to 34% in Mr. Sant in his presentation mentioned comprising underwriters, brokers and 2006-07. the insurance press were present about the fast economic growth that is The two most significant during the Briefing. resulting in increase in the insurable assets giving a boost to the country’s changes in the Indian market The speakers were introduced to the Insurance Industry. The Gross recently were: house by Mr. Shrirang Samant, Lloyd’s General Insurance Premium has risen 1. The detariffing of the motor (OD), general representative in India. The from INR 11,244 million in 1985 to INR fire and engineering classes and 2. The cut of 5% in mandatory cessions to GIC by the domestic insurers with effect from 01.04.2008. The resultant steep fall in the rates especially in Fire Class, led to regulatory intervention whereby a cap of 50% on the discounts was put. However, this cap has now been removed. The abolition of Tariff Policy Wordings which was planned to take place with effect from 01.04.2008 has been postponed by the Indian Regulator considering the (un)preparedness of the market. However, the mandatory cessions would continue to be phased out. The FDI cap of 26% is expected to go up eventually, but it is difficult to anticipate the time-frame for this. Health, Motor
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and Pensions would be the major growth products at reasonable rates. very cordial and mutually beneficial. areas in the Indian Market. Other Presentations While GIC Re’s reinsurance protections are placed in the Lloyds, GIC Re Speaking about GIC Re Mr. Sant The second speaker Mr. Anand Kumar participates in the reinsurances of many mentioned its strong financials and of ICICI Lombard presented the current of the syndicates in Lloyds. He said experienced management team. He trends in the Indian insurance market this relationship is expected to get said that GIC Re is focussing on growth from an insurer’s perspective His stronger in the coming years. of its international business portfolio presentation was followed by Mr. with an objective of becoming a major Lunavat’s talk on the emerging The Briefing concluded with a vote of international player and proposes to scenario. Mr. Lunavat explained the thanks from Mr. Samant. It was compete for business on the basis of regulatory framework and informed that heartening to witness the keen interest price, service and expertise. the Indian insurance market was shown by the participants in the matters concerning India, its economy and its Post detariffing, GIC Re looks forward awaiting second phase of detariffing in general insurance industry. It is to the market to stabilize soon and terms of policy wordings after important to mention that the Lloyds expects underwriting discipline completion of first phase of detariffing. have formally communicated to Mr. Sant especially from the major players. The presentations were followed by an the overwhelming feedback received There is a growing need to utilize interactive session. There were from the participants. actuarial expertise and sophisticated several queries about various tools in the areas of rating and Cat regulations as regards the mediation Modelling. GIC Re also expects the activity in India. A question was also companies to develop technical raised about the relationship between expertise in area of risk management. Lloyds and GIC Re. ...Sanjay Mokashi The market requires innovative Mr. Sant described the relationship as Seminar on PML Assessment & PML Underwriting at Asian Re Bangkok, Thailand
Asian Re organised a seminar on “PML Assessment and Underwriting” in technical collaboration with GIC Re in Bangkok, Thailand on 23rd April, 2008.
Mr. Abhijit Das, Assistant General Manager and Mr. N. Saravanabhavan, Senior Manager (Reinsurance) of GIC Re Mumbai were the faculty
for the seminar. will conduct similar need-based Asian Re , Bangkok, an seminars on technical subjects of intergovernmental organization under topical relevance in South East Asian the UN-ESCAP was formed with the markets . This would propel the brand initiative and support of the of GIC Re as a technically sound Government of India. reinsurance solution provider.
GIC Re in collaboration with Asian Re
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AVIATION UNDERWRITING - A PERSPECTIVE
Aviation sector continues to hog the overlooked. These principles are: ground. Thus reaction time available headlines in the domestic as well as adequacy, reasonableness, accuracy to a helicopter pilot is different from that international media for right reasons as (to the extent feasible), equitability for available to a fixed-wing pilot. Similar well as wrong. Unprecedented policyholder inter se, competitiveness is the case with offshore operations for domestic passenger and air traffic and should appropriately reflect the risk helicopters. Worldwide offshore growth has moderated in recent past getting transferred. Equitability operations have a significantly higher while rising fuel prices are likely to shift incorporated in merit rating accident rates as compared to on- the market share balance in favour of methodology requires that similar risks shore operations. budget airline operators, domestically attract similar premium while there is The turbo-prop aircraft are propeller- as well as internationally. Over a score no cross-subsidy among policyholders driven and thus susceptible to of air carriers has faced bankruptcy in and minor variations in risk mechanical failures as compared to recent past owing to steep increase in characteristics attract discounts and turbofan (jet) aircraft which are less oil prices world-over. In the Indian loadings, as appropriate. Additionally prone to mechanical failures. There is context, as the structural bottlenecks but no less important are the like pilot shortage have been mitigated considerations of catastrophe to a significant extent, the problem of component in premium and minimum pilot shortage has got transformed into premium requirement to service the a problem of pilot shortage with type capital deployed while keeping in mind rating (type rating is certification the implications of degree of operation denoting proficiency on a particular of law of large numbers (loading for type of aircraft). New airports at fluctuation in loss experience), given Hyderabad and Bangalore have the portfolio size. already become operational. Delhi and It is observed that in rating increasingly Mumbai airports are being upgraded the differentiation between jet aircraft, but congestion at several other airports turboprop and helicopters is getting is stll an irritating factor. diluted which is not supported by Indian aviation sector witnessed accident rate statistics for these crossing of 1000 mark in recent past different types of aircraft. as far as aircraft count is concerned. Helicopters are a case in point. A The market has about 200 helicopters helicopter relies on rotating wings for and 50 corporate jets part from 300+ the lift and thrust to remain aloft and to airliners. Aviation sector has been move forward. Unlike fixed wing turbo- thus a clear case for differentiating witnessing significant insurance prop or jet aircraft which would go into between turbofan, turbo-prop and interest over a last couple of years. glide mode in case of engine failures, helicopters. Turbo-props are known to Domestic insurance carriers have helicopter cannot glide. With each be about four times as likely to get created capacities to be able to partake rotation, the helicopter struggles to involved in an accident as a turbo-fan of this growing market. remain in air. With failure of engine, aircraft. Similarly, the accident rates In Indian market, the aviation insurance the helicopter starts descending which of single-engine and twin-engine rates have been quite competitive, and is called auto-rotation. Pilots are aircraft differ by a wide margin (by are lower than international levels. This trained for auto-rotation. Not all failures about half) and cannot be ignored in is understandable given underwriting of engine situations however would any premium rating exercise. While capacity available in the domestic allow for safe auto-rotation. Failure at twin-engine aircraft is more reliable, it market but what is somewhat an altitude of about 500 feet gives the places higher demands on the pilots disconcerting is that basic principles of pilot a time of about 20 seconds in by way of handling the asymmetric insurance pricing are grossly autorotation before touching the thrust when one engine fails.
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Aircraft accidents have been broadly be a matter of comfort but to ensure misconception that good knowledge of attributed to three categories of predictability of underwriting results the going rates and ability to bag the causation: the pilot, the aircraft and within acceptable limits would require business can constitute successful causes external to the aircraft. In most that risks be categorized based on risk business development. The effort thus aviation accidents, with increasing characteristics and have sufficient should be restore a modicum of redundancies built into aircraft systems numbers for the law of large numbers balance based on basic ratemaking and higher reliability, it is the pilot and to operate in each such category. considerations in premium human factors which are responsible From this perspective, 200 helicopters determination within the framework of for a majority of accidents. The pilot of varying ages, makes and values put imperatives of a competitive de-tariffed training thus is of paramount to varying uses may not be considered insurance markets. importance. It is observed that pilots a good enough number to enable Core competence of a risk carrier is a really 'get comfortable' with an aircraft insurers to spread their risk effectively. thorough understanding of the risk after about 200 hours of flying on a The same applies to corporate jets which gets reflected in categorization given type of aircraft and about 1000 which range in value from USD 5 Mln and quantification of risks. hours of total flying time. Statistically to USD 45 Mln and business jets could Underwriting discipline is the only speaking, the incidence of accidents possibly be worth USD 70 Mln. The source of sustainable competitive falls sharply after the pilot achieves number of such jets in Indian market advantage for a risk carrier in the 200 hours on the aircraft type. While is about 50. There is thus apparently opinion of living legend Warren Buffet. the shortage of pilot as outlined above inadequate spread in different Any such discipline presupposes is largely addressed in the Indian categories of aircraft in the Indian superior perception and insight into the context, the skill availability with market which is in line with the nature nature of risks which would consider reference to different aircraft types of aviation risk portfolio worldwide. varying loss-producing characteristics remain somewhat scarce. As far as This thus explains the international and exposures of individual risks and helicopter accidents are concerned, character of the aviation (re)insurance insureds in the rates. And lest it should various research studies attribute the markets. be overlooked, underwriting discipline accidents to pilot error in 60-75% As it happens, the non-life insurance is required predominantly during soft cases depending upon classification market (and reinsurance markets also) market conditions and would tend to parameters. is driven more by supply side factors get compromised in the face of It needs to be understood that today's in stead of demand side factors which exigencies of growth aspirations. sophisticated corporate jets (known as tend to remain largely inelastic. Warren Buffett in his letter to the Technologically Advanced Aircraft) are Insurance prices are driven by shareholders of Berkshire Hathaway matching the commercial airliners in capacities which take two forms: Inc. put underwriting discipline at the their operational complexity, reliability support for a class of business to direct centre stage of insurance organization and functionality and thus, their writers by capital providers and and thus a source of competitive demand on the skills and proficiency reinsurance treaty capacity provided advantage. It is worth quoting: "While of pilots is much higher. More by reinsurers. Creation of capacities all concerned may intend to underwrite sophisticated aircraft while offering by domestic players is unlikely to with care, it is nonetheless difficult for greater safety and dependability also improve the rating scenario anytime able, hard-driving professionals to curb simultaneously create a significant soon. On the positive side, the market their urge to prevail over competitors. increase in information load for the pilot is growing at a healthy rate with more If "winning," however, is equated with which can be a source of distraction. aircraft coming in. market share rather than profits, This thus results in two crew operation Driven by competition, premium trouble awaits. "No" must be an mandated by the manufacturers. With volume targets and fear of losing important part of any underwriter's greater crowding of the Indian skies, market share apart from growth vocabulary." the capability of the pilots to maintain aspirations and compulsions, it is higher situational awareness as well plausible that underwriting as skills like touch and go (for go- considerations cannot be fully factored around after aborted landing) cannot in business acceptances. At the same be overemphasized. time, the perils of overlooking the ...Hitesh Joshi Coming to the size of the market, the fundamentals of ratemaking cannot be total number of aircraft at 1000 may overemphasized. There can be a
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Crude Oil & Petroleum Products
Oil accounts for a large percentage of nuclear energy hold much promise, compound containing carbon and the world’s energy consumption, none has yet proved an economically hydrogen, with or without non-metallic ranging from 32% for Europe and Asia viable replacement for petroleum elements such as oxygen and sulfur. and of 53% for the Middle East. Other products. Crude oil varies greatly in appearance geographic regions’ consumption depending on its composition. It is Oil prices soaring high make a major patterns are: South and Central usually black or dark brown. impact on global economy. World is America- 44%, Africa- 41% and North going through such a phase and efforts To extract the maximum value from America- 40%. Demand for energy is are being made to resolve this crisis. crude, it first needs to be refined into set to continue to grow and oil is Through the following paragraphs, one petroleum products. Petroleum’s worth expected to maintain its leading can take a peek into the world of crude as a portable, dense energy source position in meeting the world’s growing & petroleum products. powering the vast majority of vehicles energy needs for the foreseeable and as the base of many industrial future. Oil is in high demand world over Oil is a substance that is in a viscous chemicals makes it one of the world’s and reserves are barely enough to go liquid state. Crude oil is a naturally- most important commodities such as beyond a certain limit looking at occurring substance found in certain gasoline or petrol, liquefied petroleum growing demand, both by advanced & rock formations in the earth. It is a dark, gas (LPG), naphtha, kerosene, gas oil developing economies. Technology sticky liquid which is classified as a and fuel oil. Other useful products which support and new reserves are the hydrocarbon. This means, it is a hopes of future. In 1920, a barrel of crude oil (42 gallons) yielded 11 gallons FACT FILE of gasoline, 5.3 gallons of kerosene, A barrel is 42 US gallons or approximately 159 litres. 20.4 gallons of gas oil and distillates The Organization of the Petroleum Exporting Countries (OPEC) is a permanent and 5.3 gallons of heavier distillates. intergovernmental organization, created at the Baghdad Conference on Now the yield of a barrel of crude oil September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. has increased to almost 21 gallons of The five Founding Members were later joined by nine other Members: Qatar gasoline, 3 gallons of jet fuel, 9 gallons (1961); Indonesia (1962); Socialist Peoples Libyan Arab Jamahiriya (1962); of gas oil and distillates and somewhat United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) less than 4 gallons of lubricants & 3 — suspended its membership from December 1992-October 2007; Angola gallons of heavier residues. Although (2007); and Gabon (1975–1994). alternative energy sources, such as More than three-quarters of the world’s oil reserves are located in OPEC geothermal energy, solar energy and countries. The bulk of OPEC oil reserves is located in the Middle East, with Saudi Arabia, Iran and Iraq contributing 56% to the OPEC total. Though most of the world wants the oil crisis to end fast, as per some researchers, per barrel price is expected to reach as high as $200 a barrel by the end of 2009. Saudi Arabia is an oil-based economy with strong government controls over major economic activities. It possesses both the world’s largest known oil reserves, which are 25% of the world’s proven reserves, and produces the largest amount of the world’s oil. Iraq holds the world’s second-largest proven oil reserves, with increasing exploration expected to enlarge them beyond 200 billion barrels (32,000,000,000 m³) of “high-grade crude, extraordinarily cheap to produce.” The United States, with about 5% of the world’s population, is responsible for 25% of the world’s oil consumption while only having 3% of the world’s proven oil reserves
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Sr. Top 15 Oil Top 15 Oil Top 15 Oil Top 15 Oil non- reserves, Venezuela has larger reserves No. Producing Nations Exporting Nations Consuming Nations producing consumer than Saudi Arabia due to crude reserves Nations derived from bitumen. 1 Saudi Arabia# Saudi Arabia # United States United States The world at large consumes 30 billion 2 Russia Russia China Japan barrels of oil per year. As of now, 90% 3 United States Norway Japan China of global vehicular fuel demand is met 4 Iran # Iran # Russia Germany by petroleum products. The future of 5China United Arab Emirates Germany South Korea 6 Mexico Venezuela # India France petroleum as a fuel, however, remains 7 Canada Kuwait # Canada India somewhat controversial. Some reports 8 United Arab Emirates#Nigeria # Brazil Italy conclude that there is just about 40 9 Venezuela # Algeria # South Korea Spain years of petroleum left in the ground. 10 Norway Mexico Saudi Arabia # Taiwan Others claim that technology will 11 Kuwait # Libya # Mexico Netherlands continue to allow for the production of 12 Nigeria # Iraq # France Singapore cheap hydrocarbons and that the earth 13 Brazil Angola # United Kingdom Thailand has vast sources of unconventional 14 Algeria # Kazakhstan Italy Turkey petroleum reserves in the form of tar 15Iraq # Canada Iran # Belgium sands, bitumen fields and oil shale that Source: U.S. Energy Information Administration, figures as of 2006, (# denotes OPEC membership) will allow for petroleum use to continue are not fuels can also be manufactured geographic location it is produced in in the future. It is said that the Canadian by refining crude oil such as lubricants (e.g. West Texas, Brent, or Oman), its tar sands and United States shale oil and asphalt used in paving roads. There API gravity (an oil industry measure of deposits represent potential reserves are more than 4,000 different density) and by its sulfur content. matching existing liquid petroleum petrochemical products, but those Crude oil is considered light if it has deposits worldwide. However, there which are considered as basic products low density or heavy if it has high are factors which may extend or reduce include ethylene, propylene, butadiene, density. It is referred to as sweet if it this estimate, including the rapidly benzene, ammonia and methanol. The contains relatively little sulfur or sour if increasing demand for petroleum in main groups of petrochemical end- it contains substantial amounts of China, India and other developing products are plastics, synthetic fibres, sulfur. nations; new discoveries; energy synthetic rubbers, detergents and Light crude oil is more desirable than conservation and use of alternative chemical fertilisers. Petroleum is also heavy oil since it produces a higher energy sources as also new the raw material for many chemical yield of gasoline, while sweet oil economically viable exploitation of non- products, including pharmaceuticals, commands a higher price than sour oil conventional oil sources. solvents, fertilizers, pesticides and because it has fewer environmental Rapidly rising crude prices have a plastics. Considering the vast number problems and requires less refining to bearing on insurance industry in so far of products that are derived from it, meet sulfur standards imposed on as crude is transported via sea routes crude oil is a very versatile substance. fuels in consuming countries. The and shipments are insured. Sharp rise On the technical side, three conditions proportion of hydrocarbons in the in crude price increases the values at need to be present for oil reservoirs to mixture is highly variable and ranges risk. Some insurers may find capacity form. source rock rich in organic from as much as 97% by weight in the crunch while others may risk giving material buried deep enough for lighter oils to as little as 50% in the reduction in rates due to competitive subterranean heat to cook it into oil; a heavier oils. forces. In any case, it is going to be porous and permeable reservoir rock The top three oil producing countries challenging times ahead! for it to accumulate in and a cap rock. are Saudi Arabia, Russia and the Fluids typically organize themselves United States. About 80% of the like a three-layer cake with a layer of world’s readily accessible reserves are water below the oil layer and a layer of located in the Middle East, with 62.5% Complied from gas above it. The petroleum industry coming from Saudi Arabia, UAE, Iraq, various sources by generally classifies crude oil by the Qatar and Kuwait. Going by the ...Deepak Godbole
www.gicofindia.in 10 ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS HAPPENINGS
VISIT OF PARLIAMENTARY COMMITTEE ON OFFICIAL LANGUAGE India is a land of diversity with different religions, cultures members of the committee were Shri Satyanarayan Jatia, and a rich variety of languages. The founding fathers of our Shri R. Kusumaria and Shri Matilal Sarkar. Constitution extensively deliberated on the status to be The Committee also took up the appraisal of implementation accorded to our different languages after independence. of Official Language Act in Minerals & Metals Trading It was decided on 14th September, 1949 that Hindi shall be Corporation of India, (MMTC) and Khadi & Village Industries the official language of the Centre where as other State Commission (KVIC). Three separate meetings were held to Languages were kept in the schedule 8 of the Constitution discuss the progressive use of official language in each of giving them the status of State Official languages. the three Organisations. GIC Re coordinated the entire activity. Essentially, thus, Official Languages Act, 1963 provides that Mr. Tarun Bajaj, Joint Secretary and Mr. Rameshbabu Aniyeri, Hindi is the Official Language of Centre and regional languages, Joint Director Financial Services Division, Minsitry of Finance, covered under schedule 8th are Official languages of the Government of India were also present on the occasion concerned States. Mr. Yogesh Lohiya, CMD GIC Re, General Managers Mr. To ensure smooth and effective implementation of Official M.Ramprasad and Mrs. B. Ramani, Shri Praveen Kumar Language Policy, various Committees are constituted. The Bhagat Deputy General Manager in charge of Official language apex Committee is the Parliamentary Committee on Official Implementation of GIC Re., Mr. K.V. Pathak, Assistant Language. It consists of thirty members, of whom twenty General Manager and Mrs. P. G. Manisha, Chief Manager members belong to the House of the people (Lok Sabha) and participated in the discussions. ten members are from the Council of States (Rajya Sabha). Mr. Lohiya made a presentation to the committee regarding It is the duty of the Committee to review periodically the GIC Re’s efforts with reespect to implementation of official progress made in the use of Hindi for official purposes of the language. Potential for increasing the use of Hindi in day-to- Union and submit a report to the President of India.The third day work of the organisation further was discussed. Sub-Committee of Parliamentary Committee on Official Suggestions were made to make the implementation work Language on 11th April, 2008 reviewed the performance of smoother and more conducive. General Insurance Corporation of India (GIC Re) on various aspects related to implementation of Official languages Act GIC Re’s performance as regards use of official language, in the organisation. Hindi as also the co-ordination of the activity was appreciated by the committee members. Some valuable suggestions were Shri Mohan Singh, senior Member of Parliament was the acting also made by the committee to GIC Re Management. Deputy Chairman of this inspection committee. Other Meeting concluded with a vote of thanks by Mr. P. K. Bhagat, Deputy General Manager
..Medha Parulkar
11 www.gicofindia.in ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS EMPLOYEES CORNER
GIC Re Employees’ Service Benefits
Recently, all the employees of the GIC Re have been given their personal copy of the Service Terms and Benefits Booklet, covering the service conditions applicable, not only from Recruitment to Retirement but also covering the details of post retirement benefits to employees. The employees may be aware that the service conditions of employees in GIC are governed by the Schemes notified by the Central Government under Section 17A of the General Insurance Business (Nationalisation) Act, 1972. There are four notified Schemes as under : 1. Rationalisation Scheme, 1974, applicable to Clerical and Subordinate Staff employees. 2. Rationalisation Scheme, 1975, applicable to Officers. 3. Rationalisation Scheme, 1976, as applicable to Officers providing for rules relating to Termination, Superannuation and Retirement. 4. Pension Scheme, 1995, applicable mainly to employees in service upto 31.12.2003. The ‘Service benefits’ covered in the Booklet, provide synopsis of the major benefits, as per the notified Schemes, such as Scales of Pay, Increment/s, Dearness Allowance “ ” (DA), House Rent Allowance (HRA), City Compensatory Allowance (CCA), Transport Allowance, Provident Fund / Pension Fund contribution rate, Gratuity, various types of Leave - / Holidays, Hours of Work, Overtime etc. Brief details of the Benefits which are not specifically covered in the above mentioned notified Scheme/s, are given. This part covers benefits such as Festival Advance, Vehicle Loan, Housing Loan, LTC, Tour entitlements, Lease Rent Accommodation, GSLI, GTIS contribution, Medical Benefits etc. Besides, the Service Terms and Benefits Booklets, a copy of General Insurance (Conduct, Discipline and Appeal) Rules, 1975 (in short, CDA Rules) is separately provided to all employees giving information in respect of the types of acts / omissions which may be construed as Misconduct and the procedure which will be followed in imposing minor / major penalties and the Competent Authorities for each cadre. All the employees will find these Service Terms and Benefits Booklets and CDA Rules copy book useful and may serve as handy reference material on major service conditions. ....Santosh Phatak
www.gicofindia.in 12 ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS FOCUS
Stay Safe during Monsoon
Heavy monsoon rains leave you not reddening of eye, are suspected cases you live in any such building, it is better only with roads that have more potholes of leptospirosis. The good news, to leave. Nothing is worth losing your than perhaps the surface of Mars, however is that leptospirosis can be life. The civic authorities every year drains that resemble gurgling mountain treated and is not fatal. declare several old buildings as rivers, puddles that can be mistaken for dangerous and unfit for habitation. But The spirochete Leptospira interrogans pools and traffic jams that have no the occupants pay no need and in turn bacterium causes the disease. These beginning or end but also with a crop of pay with their lives. germs love the humid environment. The extra hazards and diseases. infection occurs through contact with Visibility is generally poor during rains. Rains do bring much-needed respite contaminated water or food or soil A light coloured raincoat with a visored from the long spell of sultry, scorching containing urine of rodents and dogs. cap and proper footwear offers you summer but it is important that we get While you are walking through better protection when compared to an our safeguards ready before the contaminated flood water, you can get umbrella. Unlike an umbrella, it leaves monsoon in its full fury is upon us. infected through skin contact, especially both hands free and does not get into with mucosal surfaces, such as eyes anyone else’s way. Charity begins at home and so does or nose or broken or bruised skin on safety. Electricity and water do not go Children love to splash through feet. The disease is not spread from together. It would be wise to give a waterlogged streets, this could be person to person. thorough check-up to the wirings, dangerous. Water logging conceals a switches, plugs and positioning of wires The symptoms can sometimes be lot of rubbish spilling over from dustbins, around the house before monsoon. misleading and therefore could be drains and manholes. It often contains Furthermore, do not forget the electrical mistaken for other diseases. Hence it glass pieces, stone chips, and slivers appliances. In case they have any is best to consult your family physician of wood and other substances. These faults, attend to them at the earliest. in case you experience any of the can inflict serious injuries on tender bare symptoms mentioned above, especially feet. Furthermore there is always an A stitch in time saves nine. During rains, during monsoons. open manhole lurking somewhere to many houses, especially the old ones, gobble up an unwary child. spring leaks. Make sure the electrical Dangers of slips and falls also increase wirings are well clear of these leaks. during rains. A window left open, a gap Constant water logging and heavy rains Water dripping on to live electrical wiring in the door and the floor level, all can damage the roads causing cracks, can cause fatal accidents. Many a times let rain water seep in. Mop it dry potholes and rough and uneven we go barefoot in homes and even immediately, especially if you have patches. Power cables snap and hang outside. This practice needs to be given toddlers or elders at home. Slipping and dangerously creating a dangerous a go by. Take no chances with falling on wet patches can cause scene. The threat of electrocution electricity. It is a good friend only if serious injuries. becomes alive. Trees are uprooted and treated with respect. Never handle block passage. This calls for extra care You may have expensive furniture in electricity barefoot or with wet clothes and extreme caution on part of both your drawing room. Keep it safe from and shoes. You could get a nasty drivers and pedestrians alike. It is a good moisture and humidity. Rearrange it in shock. Remember to change damaged idea to carry a torch with you and to such a way that it does not get wet. wiring so that no temporary connections wear light and bright clothes when you Give special attention to the upholstery. are lying anywhere around the house. plan to venture out of house during rains Water not only damages the upholstery whether during the day or night. If you have waded through flooded but sitting on damp cushions and roads during heavy monsoon showers, mattresses is also unhealthy. Besides, Be extra alert and safety conscious both you may be at a risk of getting infected it requires a herculean effort to dry wet in and out of the house. Wish you a with leptospirosis. According to Public bedding and upholstery on damp and safe monsoon. Health Departments, all those who cloudy days. complain of abrupt onset of high-grade Wet months also bring about the fever, severe splitting headache, sick ...Anoop Khanna collapse of weak and old buildings. If look, muscle pain, body ache or
13 www.gicofindia.in ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS INSIDE-OUTSIDE
Hearty Congratulations & a warm Hearty Congratulations to Mr. welcome to Mr. A.K. Roy & Mr. R. Joseph Augustine, who was promoted as a General Manager and took charge Raghavan on their promotion and on 23rd June 2008 in National Insurance assuming charge as General Company Limited, a GIPSA company. Managers of GIC Re from 23rd June He was with GIC Re from 29th June 2001 2008. till 23rd June 2008. Mr. Avinash Bagul, who joined GIC Re as an Assistant on 26th May 1988 and rose to become a Senior Manager, resigned from his services and was relieved on 24th April 2008. Mr. R. Raghavan, a direct recruit officer of the 1981 batch is a Physics graduate Mrs. Meera K. Sawant,, who joined and holds an MBA in Finance & GIC Re as a direct recruit officer in May Marketing, He is also a Fellow of the 1985 and rose to become an Assistant Insurance Institute of India and an General Manager in August 2004, Associate of the Chartered Insurance resigned from her services on Mr. Ashok Kumar Roy, a direct recruit Institute of UK. 06.06.2008 after a fruitful association officer of the 1979 batch holds a B. of 23 years. His tenure in The New India Assurance Tech (Hons) degree in Agricultural Company Ltd. includes a six and a half GIC ReNEWS wishes Engineering. He is also a Fellow of year stint in New India’s Oman Branch. them all the very best the Insurance Institute of India. He Prior to joining GIC Re, he was heading for their future was heading the Oriental Insurance the Techno-marketing and Engineering endeavour. company’s Jaipur Region, prior to departments. joining GIC Re ...K. Thangaraj Recipe For the dough: Dal (Tur) Knead wheat flour. Make small balls and roll into thin chappatis. Cut chappati in Dhokli diamond shape pieces.
Ingredients: Seasoning: Whole Tur (Dried) - 2 cups Heat oil in a vessel. Put mustard Tomato - 1 seeds, red chilly, two garlic, half on- ion, hing. Put cumin powder, coriander Onion - 1 powder, red chilly powder, garam Small Garlic pod - 1 Garam Masala - 1 tsp masala and add cook tur. Ginger - 2 inch Oil - 2 tsp Add two glass of water. Boil for 5 min- Green Chilly - 3 Wheat Flour - 2 Cup utes. Add the cut pieces of chappatis Salt to taste Hing - ½ tsp and cook for another10 minutes on slow Mustard seeds - 1 tsp Preparation: flame. Garnish with coriander leaves. Cut tomato, garlic, ginger, green chilly, Turmeric Powder - 1 tsp half onion into small pieces. Put whole Red Chilly - 2 tur, tomato, garlic, ginger and green Coriander Powder - 1 tsp chilly pieces and salt into pressure Cummin Powder- 1 tsp cooker. Cook till 5 whistles and then ...Jayashree Patel Red Chilly Powder - 1 tsp on slow flames for 20 minutes.
www.gicofindia.in 14 ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS GLOSSARY Glossary COMBINED UNEARNED RATIO: the PREMIUM: the combination of an proportion of a insurer’s (or a of premium which reinsurer’s) loss relates to the portion ratio and expense of a risk which has ratio. Another not yet expired. name for Insurance OPERATING TECHNICAL RATIO or TRADE RESERVES: a RATIO. collective term for the amounts set COMMUTATION: aside in respect of the finalisation of underwriting an outstanding liabilities: unearned loss by payment of an agreed figure in contract. An implied warranty must be premium reserves, unexpired risk settlement. strictly complied with and in the event reserves, claims outstanding and the of a breach of warranty the insurer is funds held for three-year and treaty ENDORSEMENTS: An additional piece discharged from liability as from the business. of paper, not part of the original breach of the date, but the insurer may insurance policy, in which certain terms waive the breach or the breach may be THIRD PARTY LIABILITY: the and conditions, when attached to the waived by Statute. indemnity against all sums which an original insurance policy, becomes a insured shall become legally liable to legal part of that contract. NON-PROPORTIONAL pay to third parties upon injury, loss or REINSURANCE: reinsurance such as damage that is accidentally caused. EXCESS: The first part of the cost of a excess of loss reinsurance where the claim which is not covered by a policy. reinsurer’s liability is not calculated as SURPLUS REINSURANCE: It may be borne by the insured or by a proportion of the insurers. reinsurance of amounts over a specified another party. amount of insurance, premiums and POOL: a pool is created when several losses being shared proportionately EXCLUSION: A clause in a policy insurers agree to share all insurance’s between insurer and reinsurer. excluding certain losses e.g. war perils, of a defined nature in specified frustration, nuclear weapons, dangerous proportions. SOFT MARKET: a market in which it drugs, earthquakes etc. is relatively easy to obtain insurance TOP LAYER: a layer of excess of loss and therefore is characterised by low FORTUITOUS LOSS : Unforeseen and reinsurance arranged to protect the premiums. unexpected loss that occurs as a result reinsured against the occasional of chance. exceptionally large loss.
IMPLIED WARRANTY: a warranty that UNDERWRITING EXPENSE RATIO: is not expressed in the policy The ratio of the sum of the acquisition Compiled from various sources by specifically, but which is understood by expenses and operational expenses to ...Anoop Khanna both parties to be incorporated in the net premiums earned.
15 www.gicofindia.in ISSUE 03 VOLUME 01 June 2008 GIC Re NEWS FEEDBACK
Respect Your Banknotes : RBI appeals to Public
The Reserve Bank of India has appealed to members of public not to use banknotes for making garlands, decorating pandals and places of worship or for showering on personalities in social events, etc. Such actions deface the banknotes and shorten their life, the Reserve Bank stated and added that banknotes should be respected as they are a symbol of the Sovereign and public should not misuse them so that the life of banknotes is enhanced. The Reserve Bank has stated that it has been taking all measures to supply clean banknotes across the country and has urged the members of public to contribute their mite to its efforts.
I thank you very much for sending me a Received Issue No. 02, Volume 1 of GIC copy of GIC News of March 2008 and Re News for March, 2008 and was very Thank you for sending GIC Re news. was very happy to read and more happy happy to read the news about GIC Re to see the photographs. I am sure it will help me to update and its activities. We could also see in Also this news letter gives all the myself on the happenings in GICRE and this volume other interesting articles corporate news of GIC and it is nice to the Indian Market. and would like to congratulate ...... keep in touch and also some market entire editorial team for bringing out news. All articles are good for reading. Hope I will continue to receive future Also good to read some recipes. such useful publications. copies! Overall good issue and keep it up. Thanks again and do sent future We wish the publication good popularity issues… for the future...... Regards
With best regards, Bharat J. Boda Natarajan Murali Achala Nayak Chairman Asian Runoff Management General Manager Kualalampur J. B. Boda Group of Companies Pvt. J B Boda Insurance Services (L) Bhd Malaysia Ltd. Kualalampur Mumbai India Malaysia
An Appeal to GIC RE family members We welcome your feedback and also it would be nice if you can send in your contributons by way of write ups for the next issue You can send in the material to the mail id : [email protected] Team GIC ReNEWS Editor : K Raghunath Editorial Board : P. K. Bhagat, Deepak Godbole, Anoop Khanna Correspondents : Suchita Gupta, Satyajit Tripathy, J Paramsivan, Hitesh Joshi Rajesh Khadatare, K. Thangaraj, Santosh Phatak
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