“With declined risk pool system, companies would be better placed to manage the risks of their motor policy accounts. So, the loss incurred in the commercial vehicle third party space should come down,” chief financial officer of ICICI Lombard, Gopal Balachandran said
Mumbai: The Insurance Regulatory and Development Authority’s (IRDA) decision to implement “declined risk pool system” for third party motor insurance is likely to reduce the losses incurred in this space, reports PTI quoting officials of various general insurance companies.
“With declined risk pool system, companies would be better placed to manage the risks of their motor policy accounts. So, the loss incurred in the commercial vehicle third party space should come down,” chief financial officer of ICICI Lombard, Gopal Balachandran told PTI here.
He also said that though loss ratio in the commercial vehicle insurance space should reduce in the future, the quantum of decrease would depend on the price correction expected in the next fiscal in the motor insurance premium.
Declined motor pool is the arrangement in which insurers would have the right to refuse or decline vehicle insurance and these vehicles will be insured from the pool shared by insurers.
Presently all commercial third party premium are pooled and losses on account of the commercial third party motor portfolio are shared among all general insurance players according to market share.
Currently, the loss ratio stands at 145% in the motor insurance space or companies incur a loss of Rs45 for every Rs100 premium earned in a policy.
On Thursday, IRDA came up with guidelines for implementation of declined risk pool system, in which it said that this system would only be applicable to standalone third-party liability insurance.
As per the notification, no comprehensive motor insurance policy can be settled from the pool, which will reduce the overall corpus of the third party pool.
Referring to third party pool corpus, Mr Balachandran said that it should be reduced to 25% in the next fiscal from its present size of around Rs6,000 crore.
Other industry officials also echoed similar sentiment.
“We hope that losses incurred in the motor insurance space by general insurance companies will be reduced due to declined risk pool system with prudent underwriting practices,” managing director and chief executive officer of Bharti AXA General Insurance, Amarnath Ananthanarayanan said adding it would help in better claim settlements in motor insurance space.
According to the regulator, the insurance companies would now need to retain 20% of the gross premium in their accounts, give 10% to General Insurance Corporation of India and rest 70% would go to the motor pool.
Referring to this new system, chief executive officer of L&T General Insurance, Joydeep Roy said declined pool is likely to reduce the loss ratio and bring more transparency into the system.
The government had offered 34 areas for exploration and production of oil and gas in the 9th round of bidding under NELP and bids for received for 33 had been received at the close of bidding on 28th March last year
New Delhi: The government Friday approved the award of less than half of the 33 oil and gas blocks that were bid for in the ninth round of New Exploration Licensing Policy (NELP), reports PTI.
The Cabinet Committee on Economic Affairs (CCEA) approved award of 16 blocks, oil minister S Jaipal Reddy told PTI here.
“Bids 16 blocks were recommended for acceptance by the Empowered Committee of Secretaries, the same has been approved by CCEA,” he said.
The government had offered 34 areas for exploration and production of oil and gas in the 9th round of bidding under NELP and bids for received for 33 had been received at the close of bidding on 28th March last year.
In the previous eight rounds of NELP, 235 blocks have been awarded so far.
The 34 exploration blocks offered in NELP-IX included eight deepwater blocks, seven shallow water blocks, 11 on-land blocks, and 8 Type-S (or small) on-land blocks, he said.
Sources said some blocks in Mahanadi basin off the Orissa coast in east India had to be withdrawn as they fell in Naval firing/exercise areas while bids for several others had to be rejected due to various reasons.
The CCEA approved award of two shallow water and two onland blocks to consortia led by ONGC (Oil and Natural Gas Corporation). State-owned OIL led consortia got two onland blocks in the Assam-Arakan basin. Deep Energy walked away with two Cambay basin blocks while Focus Energy beat Reliance Industries to bag an area in north-west Indian Rajasthan state.
The five blocks awarded to companies like Sankalp Oil and Natural Resources, Pratibha Oil and Natural Gas Pvt Ltd and Pan India Consultants.
Sources said the ECS had recommended rejection of single bids for eight blocks where profit petroleum offered to the government ranged between 6.6% and 6.7%.
ECS suggested rejecting bids by Reliance Industries and state-owned ONGC for the Andaman sea block as they had offered “very low” profit share to the government.
It also wanted the bid by a consortium of ONGC-OIL and GAIL for deepsea block GS-DWN-2010/1 and that of ONGC-OIL-BPRL for Kerala-Konkan deepwater block KK-DWN-2010/1 also rejected as they offered very low profit share.
Oil companies are currently losing Rs14.73 a litre on diesel, Rs30.10 a litre on kerosene and Rs439.50 per 14.2-kg domestic LPG cylinder. For the full fiscal, they are projected to lose about Rs1,40,000 crore in revenue on selling the three products at government controlled rates
New Delhi: Oil minister S Jaipal Reddy Friday underlined the need for having a relook at petroleum product prices, but said the government is not contemplating decontrol of diesel rates just yet.
“The prices of all petroleum products need to be looked at again. However, we live in a real world, not only in numbers,” he told reporters on the sidelines of 7th Asia Gas Partnership Summit here.
Oil firms sell diesel, domestic LPG and kerosene at government-controlled rates which are way below the cost. Even petrol, which was deregulated in June 2010, continues to be sold at around Rs7.70 per litre less than its actual cost. [1 dollar = 51.21 rupees]
“As of now, we are not contemplating deregulation of diesel prices,” Mr Reddy said.
State-owned oil companies will need to raise diesel price by Rs14.73 a litre if the government were to free its pricing, like it was done in case of petrol in 2010.
“There is some kind of discontinuation of deregulation in petrol prices," he said. "But we have no intention of bringing regulation back.”
Oil companies have demanded that since they have not been able to raise petrol price in line with increase in cost, they be compensated by the government for the Rs4,500-crore loss they incurred on fuel sale. At present, the government compensates oil firms for losses only on diesel, domestic Liquefied petroleum gas and kerosene.
“Oil companies have no doubt suggested some measures. But the petroleum ministry does not have independent (decision making powers on it). I will take up the issue at Empowered Group of Ministers at the appropriate time,” Mr Reddy said.
The EGoM, headed by finance minister Pranab Mukherjee, is empowered to decide on pricing of three subsidised products.
The EGoM in June 2010 which deregulated petrol and if petrol is to be brought back under regulation, the same ministerial panel will have to take a call.
“I have to go to the meeting of EGoM (to decide on prices of petroleum products),” Mr Reddy said.
Before petrol price is regulated, the ministry will have to hold consultations with all, he said.
“From perspective of our ministry, all petroleum products (on which oil companies lose money on selling at a price lower than cost) need to be compensated by the government,” he said.
Oil companies are currently losing Rs14.73 a litre on diesel, Rs30.10 a litre on kerosene and Rs439.50 per 14.2-kg domestic LPG cylinder.
For the full fiscal, oil companies are projected to lose about Rs1,40,000 crore in revenue on selling the three products at government controlled rates.
The government has so far provided only Rs45,000 crore in cash subsidy to oil companies.