For 2017-18, a clutch of reinsurers and insurers led by the state owned GIC Re, have renewed the insurance cover of the ONGC(Oil & Natural Gas Corporation),the largest offshore exploration and production company in India with USD 40 billion assets, with almost 13 per cent lesser cost.
ONGC’s reinsurance deal for 2017-18 was placed in the London Market last week at a cost of around $12.9million almost 12 per cent cheaper than previous year’s premium of $15 million.
While United India has continued to lead the account in India, GIC Re has yet again emerged successful in the international bidding process for reinsurance of ONGC’s Offshore Package Policy program 2018-2020.
Almost 10 per cent of ONGC has been retained by the four state owned insures, New India Assurance(NIA), United India Insurance(UII), Oriental Insurance Company(OIC) and National Insurance Company(NIC). Among the four, NIA, at three per cent ,has retained the maximum.
Over the years, GIC Re has been leading the offshore energy package of ONGC and the lead has been followed and supported by international reinsurers.
The program extends comprehensive coverage to upstream offshore assets valued at more than $40 billion.
“ONGC program with its attractive claims history did witness competition in this international bid which saw premium come down in high single digit in percentage terms. With the company adopting global risk management practices, reinsurers find the risk attractive,’’ said GIC Re adding that pricing is an outcome of interplay of international forces of demand and supply and reflects consensus on risk assessment of the client exposures.
These types of mega risks cannot be fully absorbed in domestic risk market alone and require placement in international market for better spread of risk, said GIC Re
It is noteworthy that GIC Re leadership on the account for almost the entire last decade is supported by significant participation of international reinsurers.
Mega risks reinsurance follows international norms in coverage and pricing is an outcome of global capacity supply for such risks. Local competitive factors and market cycles do not apply to risks which require reinsurance capacity from across the globe.