Mumbai:
Hyderabad based Laurus Labs Limited has challenged the recent circular issued by the state owned GIC Re, hiking the reinsurance rates in the eight categories of industries, in the Telengana High Court.
GIC Re, in a circular issued on Feb 21 and implemented since March 1, while raising reinsurance rates in certain categories of risks, had asked general insurance companies to provide higher quotations to their corporate clients if they want reinsurnace arrangements with it.
GIC Re, the largest Indian reinsurer,said it had picked up eight categories of risks where claim ratio is above 200 per cent.
However, Laurus Labs in its writ petition filed on March 27 and which was taken up for the hearing on the last Friday by Justice P Naveen Rao, has prayed for the suspension of the implementation of the GIC Re’s circular The next hearing of the case is scheduled on Apr 4.
The writ petition of the Laurus has taken a stand that the recent circular of the GIC Re is illegal arbitrary and violative of Articles 14 and 191g of the Constitution of India and also contrary to the existing rules and regulations of the insurance regulator IRDA.
Secretary Department of Financial Services Ministry of Finance, the Secretary Department of Commerce Ministry of Commerce and Industry, the insurance regulator IRDAI, GIC Re, ICICI Lombard General Insurance, SBI General Insurance, IffcoTokyo General Insurance, Tata AIG, Future Generali India Insurance, General, and Bulk Drug Manufacturers Association India have been made parties in the Laurus Labs writ petition.
The industries targetted by the GIC Re for the price hike include textiles,plastics, Rubber Goods Manufacturing,Chemical Manufacturing below 32 degree centigrade flashpoints, Storage of category III goods, transporters godowns, street plants, and power plants.
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Analysts said while insurance costs of companies will go up,after GIC Re's move to hike its rates for ceratin categories of risks, the higher premium will correct a distortion in individual policy rates..
Post detraiffing in 2007, the domestic general insurance industry had seen heavy discounting of corporate accounts, as the general insurers have been trying grow their topline every year.
For GIC Re, these eight occupancies are part of the property insurance segment, which accounts for only 8 per cent of its portfolio.