Insurance Premiums Set to Soar for Indian Businesses
Beginning April 1, 2025, businesses across India are bracing for a significant hike in their insurance premiums. Companies purchasing insurance to protect their assets and operations could see premium increases ranging from 20% to 70%.
This surge is largely attributed to the influence of reinsurers, who have experienced a rise in claims stemming from severe catastrophic events worldwide. Reinsurers are advocating for more stable pricing structures, subsequently driving up costs for primary insurers.
The decision to increase premium rates has been influenced by reinsurers, who have faced increased claims from catastrophic events, leading them to advocate for more sustainable pricing structures.
Sectors such as chemicals, plastics, textiles, and pharmaceuticals, which often generate substantial claims and are considered higher-risk by insurers, are expected to be most affected.
Sudhish Ramteke, property practice leader at Anand Rathi Insurance Brokers, commented on the situation: “Already, the commercial property insurance cover premium (fire policy, Industrial All Risk policy) have gone up by at least 12-15 per cent for all contracts falling due on or after January 1, 2025 as insurers withdrew previously offered discounts and aligned their rates with those recommended by the Re-insurers.” Ramteke added, “For policies due on or after April 1, 2025 the premium rate increase is expected to be around 20-50 per cent. For companies whose property policies were renewed from July 1, 2024 and got the maximum discounts in the premium last year, may have to pay an increase of 50-70 percent over the premiums paid for the corresponding period in 2024.”
Additionally, insurers may impose surcharges on companies with unfavorable claims ratios. Ramteke explained, “While discounts of any kind have been disallowed on the fire and NAT/CAT (read natural catastrophe) rates, insurers may charge loading for clients whose loss ratio is above 100 per cent- hence clients whose loss ratios are adverse for the last one to three years may have to pay a much higher premium.”
The shift indicates a transformation in the Indian insurance market, necessitating businesses to re-evaluate their risk management strategies and budget for escalated costs. Ramaswamy Narayanan, the chairman of GIC RE, the state-owned reinsurer, noted that insured catastrophe losses this year reached Rs150 billion but a significant portion of those losses were retained by insurance companies. Narayanan pointed to several major events, including Hurricane Helene, Milton, and the Los Angeles wildfire, along with multiple catastrophic events in Spain, Italy, and the UK. He emphasized, “The point is losses do happen, but as long as pricing is adequate, I think capacities will be interested. And that’s what we saw early this year on Jan 1 renewals. There was much more capacity than last year available on the reinsurance market and that meant that the pricing was soft.”
