Increase in STFI premium rates

Increase in STFI premium:

STFI i.e. storm, tempest, flood, inundation cover premium rates in Standard Fire & special perils policies have been increased w.e.f. 1st March, 2016 by 50% to 140%:

Premium rating of STFI and Earthquake perils under Fire, Fire Loss of Profit, Industrial All Risk, Annual Engineering and Project policies was reviewed last time in 2012 and revised guidelines were introduced w.e.f 1st March, 2012.

Subsequent to that, India has faced several major catastrophes losses because of high intensity cyclones, heavy monsoon, flash floods and torrential rains. Some of the Catastrophe events in last 3 years are as under –

  • In June 2013, heavy flooding resulting from torrential rains and glacial leaks in the Himalayas caused losses of over Rs. 3100 crores in the state of Uttrakhand.
  • Cyclonic Storm Phailin in Eastern cost during October, 2013 caused approximate insured losses of about Rs. 1000 crores
  • In the Sept 2014, floods in J&K has caused loss to the tune of Rs. 2000 crores to the insurance industry.
  • Recent rains in Chennai and adjoining areas in November / December 2015 has caused a loss of approximately Rs. 5000 crores as per current estimation.

Such huge losses due to AOG perils have put all of us into difficult position. Despite our conscious efforts, premium rates of Fire and Engineering portfolios have not improved much to take care of such eventualities.

It has, therefore, been decided to revise the minimum premium rates for STFI for all policies of Fire (SFSP/IAR/FLOP) and Engineering (EAR/CAR/CPM/EEI Policy). However, as the exposure and intensity varies from area to area, the underwriters at Regional / SBU Level can decide upon the same from the range provided in the table below :

Minimum STFI Rates for Fire Insurance (SFSP, FLOP & IAR)

Occupancy Exiting Rate (Per Mille) Revised Rate (Per Mille)
Dwellings (Individual) 0.05 0.075 to 0.12
Non-Industrial (Section III) – e.g. Hotels, Shops, Cooperative Housing Society etc. 0.075 0.1125 to 0.15
Industrial/Manufacturing Risks (Section IV)Utilities located outside the manufacturing (Section V)Standalone storage in Godown (outside the manufacturing premises) Section VI

Tank Farms/Gas Holders (Section VII)

0.125 0.1875 to 0.220
Standalone storage in Open (outside manufacturing premises) Section VI 0.75 1.125  to 1.50

Minimum STFI rates for Engineering Insurance CAR/EAR/EEI/CPM including Project extensions :-

Policy Type Existing Rate (Per Mille Per Annum) Revised Rate (Per Mille Per Annum)
EAR / CAR / EEI / CPM 0.15 0.225 to 0.250

We would like to emphasize on the following aspects –

  1. a)        The above rates will be applicable for all policies incepting on or after 03.2016.
  2. b)         No cancellation / pre-ponement of existing policy is allowed in order to offer / avail lower rates. Even if there is a request by the Client / intermediary citing some reasons, the same should be thoroughly examined and revised quote, if any, should be offered as per the above rates
  3. c)        The rates mentioned are bare minimum. No discount can be allowed on the above the rates in lieu of higher excess or otherwise.
  4. d)        Any terms already released for policies incepting on or after 1st March, 2016 may suitably be revised.

This circular supersedes all earlier communication / approval relating to STFI.

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