General Insurance Corporation of India (GIC Re) has opted out of a role to insure London Olympics after it posted losses for the first time in its history last year as its international business sank due to floods in Thailand and Tsunami in Japan. This indicates that GIC Re will stay away from global events for few years.
The fact that London suffered a terror attack the day after it won the bid to host the biggest sporting event could also have weight on the GIC’s decision to stay away from insuring London Olympics.
Consortium that is insuring the London Olympics is lead by Munich Re.
This could be one of the most expensive insurance businesses with the games being valued with the protection cover of more than $5 billion. Any calling-off of the event itself could lead to insurers paying 350 million Euros.
GIC’s decision could cause a set back to its business as it was benefiting by writing policies in the overseas markets. Though this decision can appear to be correct in short term but in long term it may prove difficult for it to get back to international market.
In FY’12 GIC Re has posted a loss of Rs 2,469 crore on account of natural catastrophes that coincided with global economic slowdown.
In FY’12 company’s 44% revenue came from overseas business. And with its decision to stay away from international markets could lead to shrinkage in its premium income for few years before domestic business grows to offset the fall. Its underwriting losses for FY’12 stood at Rs 4,971 crore.