What are the recent trends in Project PI (professional indemnity) insurance?
As the size and complexity of projects grow, there will be a tendency to look for flaws which can have serious implications on the wellbeing of those projects. The demand for Project PI will definitely increase in near future and we are speciality players in the segment.
What are the types of risks ascertained before underwriting projects?
There can be all types of things. Sometimes equipment is not made at site, they are made far away; therefore, the equipment needs to be transported to site. The movement of equipment and material needs to happen at the right time. If these things don’t get timed or synchronised properly, there can be subsequent delays. Not only in the execution of the project, but also in the production phase and other interlinkages. There are also supply chain issues because a project may be going to supply downstream or upstream products. Sometimes they are quantified and sometimes they are not quantified.
India is a huge country and it is like one side of the country not being able to supply to the other side of the economy; this will have serious repercussions. Therefore, all these things have not really been quantified. As serious risk management comes in, more and more attention will go there. Its role will be to address those issues.
Do you feel public sector insurers have an edge over private insurance companies?
As of now, maybe, public sector insurers do enjoy an advantage due to their balance sheet size. But one must not forget that many of these projects are reinsurance driven. Therefore, once the scale becomes humongous, then no one has the balance sheet to support them. It will then become a level playing field. At the end of the day, as the size and complexities of projects grow, the security of reinsurers becomes very important.
There is a need to diversify the risk rather than keeping it all on Indian balance sheets. It may be advantageous to those who have superior front-end underwriting capabilities and solid set of reinsurance security behind them.
Private insurance players are also trying to gain a foothold in the project insurance market.
Currently, the advantage exists with PSU insurers only due to their local balance sheet size, but this advantage will not remain for long. The future will see greater underwriting capabilities, risk management capabilities, claim settling capabilities and reinsurance capabilities. All these will evolve and bring in more opportunities. The company that gets its act right need not be private sector, PSU or foreign company; it will only be determined by the company that gets its act together.