Revision of Minimum Rates for STFI Perils we.f. 15/12/2018
Dear All,
Premium rating of STFI perils under Fire, Fire Loss of Profit, Industrial All Risk, Annual Engineering and Project Policies was reviewed last time in 2016 and revised guidelines were introduced w.e.f. 1st March 2016.
Subsequent to that there have been rise in the number of extreme rain events which can be attributed to fluctuating monsoons due to changing weather patterns. This has lead to major losses because of high intensity cyclones, heavy monsoons, flash floods and torrential rains. The problem is compounded due to inadequate drainage systems, unchecked civil development and other such likely causes.
Some of the major events which caused widespread damage to lives and property in last 3 years are.
- 2016 Assam Floods – In July-August 2016, heavy rains resulted in widespread flooding in state of Assam which affected 1.8 million people.
- 2016 Vardah Cyclone – The cyclone brought heavy rainfall to Andaman & Nicobar Islands and then moved to the Eastern coast of India affecting states of Tamil Nadu and Andhra Pradesh.
- 2017 Gujarat Floods – Heavy rains in July 2017 caused severe flooding in the state of Gujarat due to which at least 200 lives were lost.
- 2018 Kerala Floods – Due to incessant rains in Kerala in August the state witnessed its worst flood in more than a century which has resulted into losses to the tune of Rs. 2200 crores.
- 2018 Himachal Floods and Landslides – Heavy torrential rains have caused landslides and flooding across the hill state causing widespread damage.
The losses have constantly put a pressure on our bottom lines. On other hand premium rates of Fire and Engineering portfolios have refused to harden up giving us hardly any room to absorb the losses.
It has therefore been decided to revise the minimum rates for STFI for Fire (SFSP / IAR / FLOP) and Engineering (EAR / CAR / CPM / EEI) policies. However since the exposure and intensity varies from area to area the underwriters can decide upon the rate from the range provided in the table.
A. Minimum STFI Rates for Property (SFSP & IAR) Policies
| Occupancy | Existing Rate (per mille) | Revised Rate (per mille) |
| Dwelling other than Co-operative Housing Societies | 0.075 to 0.12 | 0.075 to 0.12 |
| Non Industrial – Co-operative Hsg So., Hotels, Shops etc as per Section III of Erstwhile Tariff | 0.1125 to 0.15 | 0.15 to 0.20 |
| Industrial Manufacturing Risks (Section IV) Utilities located outside the manufacturing (Section V) Tank farms/gas holders (Section VII) of Erstwhile Tariff |
0.1875 to 0.22 | 0.25 to 0.29 |
| Standalone storage (outside manufacturing premises) Section VI of Erstwhile Tariff (in godown) | 0.1875 to 0.22 | 0.35 to 0.42 |
| Standalone Storage in open (outside manufacturing premises) Section VI of Erstwhile Tariff (in open) | 1.125 to 1.50 | 1.50 to 1.75 |
B. Minimum STFI Rates for Engineering Policies
STFI Rate for EAR / CAR / CPM / EEI : 0.30 per mille per annum of 0.03% (percent)
Note 1: The premium rates on engineering policies in respect of STFI to be charged on pro-rata basis based on the duration of the policy.
Revision in Earthquake Premium rate of Non-Industrial Risks we.f. 15/12/2018
As you are aware, Earthquake premium rate in Fire portfolio is charged Earthquake zone wise for Industrial risks which comprises of manufacturing risks, utilities risks, storage risks and tank farm risks, conforming to Section IV, V, VI and VII of the erstwhile Fire Tariff. However single Earthquake premium rate Rs. 0.050%o is being charged for non industrial risks which fall in Section III of erstwhile tariff.
It has been decided to charge zone wise earthquake premium rate based upon location, for all risks mentioned in Section III of erstwhile tariff except Dwellings (individual). Earthquake premium rate for Dwellings (individual) irrespective of its location shall continue to be Rs. 0.050%o.
For example, shop in New Delhi being in earthquake zone II will attract minimum earthquake premium rate Rs. 0.25%o.
By this revision, all risks except Dwellings (individual), of Section III, IV, V, VI and VII of erstwhile tariff will attract earthquake premium rate based upon its location in earthquake zone.
For clarity the table below gives the Earthquake Rates
A. Earthquake Rates to be charged for Property (SFSP) policies
Earthquake rates have been adopted zone wise, industrial and non industrial wise, which is as under. The zones are classified as per current zones in the erstwhile tariff.
| All rates are in per mille | ||||
| ZONE | IV | III | II | I |
| Dwellings other than Co-operative Housing Society | 0.05 | 0.05 | 0.05 | 0.05 |
| Non Industrial Co-operative Housing Society, Hotels, Shops as per Section III of ET | 0.05 | 0.10 | 0.25 | 0.50 |
| Industrial – Including Standalone storage, outside the manufacturing units, Utilities outside manufacturing units | 0.05 | 0.10 | 0.25 | 0.50 |
B. Earthquake Rates to be charged for Engineering policies
Additional rates to be charged for all zones as per table given below irrespective of the occupancy or nature of the project.
| All rates are in per mille per annum | ||||
| ZONE | IV | III | II | I |
| EAR / CAR / CPM / EEI (Annual Rates) | 0.05 | 0.10 | 0.25 | 0.50 |
Note 1: The premium rates on engineering policies in respect of EQ to be charged on pro-rata basis based on the duration of the policy.
We would like to emphasize on following aspects –
a. The above rates will be applicable for all policies incepting on or after 15th December, 2018.
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 only.
c. The rates mentioned are bare minimum. No discount can be allowed on the above rates in lieu of higher excess or otherwise.
d. Any terms already released for policies incepting on or after 15th December, 2018 may suitably be revised.