A.M. Best said it does not expect flooding in the Indian state of Kerala to have a significant impact on the balance sheet strength of rated Indian non-life insurers; however, the losses may add to the unfavorable underwriting performance that A.M. Best has flagged as a negative rating factor for some of these insurers.
In a Best’s Briefing, titled, “Kerala Floods: Limited Impact on Rated Insurers’ Capital, May Add to Performance Issues,” A.M. Best notes that Kerala represents a significantly smaller portion of the Indian non-life market and A.M. Best rated insurers’ overall gross premiums. Additionally, insurance penetration in India is low and insurance penetration in Kerala is estimated to be below the national average, the ratings agency noted.
The cumulative rainfall this year during the 2018 summer monsoon period in Kerala was significantly higher than normal, and together with the release of waters from dams, created severe flooding in the region.
A.M. Best said it expects fire and motor to be the most impacted lines of business. Motor own damage is one of the leading sources of business, accounting for 30 percent of gross premiums in the state. Four large insurers, which wrote an estimated 70 percent of Kerala’s gross non-life premiums in 2017, are likely to absorb the majority of claims.
A.M. Best said the affected insurers that it rates are expected to have adequate reinsurance protection, with deductibles that are small percentages of their premium base and capital sizes.
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