Insurers must provide Rs 7,000 cr more for 3rd party motor biz

Mumbai: Insurance regulator Irda wants the general insurers to provide additional Rs 7,000 crore for their third party motor business.

The general insurance companies which are already bleeding on account of excess claim over premiums are meeting in an emergency meeting on Thursday to discuss the issue. Irda had asked K P Sarma,an actuary to take stock of the financials of the third party motor pool which manges the third party motor business of the all general insurers.

Sarma in his confidential report has found a huge gap in terms of provisioning against claims by the pool. The report has concluded that the third party motor pool has to provide additional amount of Rs 7,744 crore to take care of the regulatory requirement,

Any dues against third party will ultimately be passed on the the general insurance companies who are its members. If implemented the general insurers feel it may make many general insurancecompanies insolvent as these companies are already hit by huge underwriting losses.

“Particularly, the motor business contributes a lot of loss to the general insurers. The general insurers however depend upon the motor business as it gives them day to day liquidity. But the business doesn't have reinsurance. The Irda report if implemented would totally complicate our business,'' said CEO of private sector general insurance company.

Irda report says steps may be taken by GIC which manages the motor pool to ensure that all money transferred by them back to individual companies are held by the companies in a segregated and identifiable account, including back up by known assets.

GIC may devise an appropriate format to obtain information every month, on assets backing the Pool liabilities. Further, the pool accounts currently do not publish information in a balance sheet format although revenue account is made...