Factory mutual is a big name in risk engineering. They are in existence for last 200 years. They solely focus on commercial property insurance.

Loss prevention is their complete focus. Their concept is to create a portfolio of highly risk managed property insurance clients. Each of the clients in the portfolio, make a mutual commitment to prevent loss.

In short, Factory Mutual is an insurance company with a total commitment to Loss Prevention.

In India, we have seen risk management and loss prevention given least importance both by Property insurance sellers and buyers. Risk engineering is more a formality without a sincere and serious follow-up on implementation of risk control recommendations.

When Factory Mutual started a Reinsurance branch in India, I was wondering whether in this highly price sensitive market, where, giving discounts in insurance premium for fire prevention & protection and other risk management steps for NAT CAT protection, almost in non-existent (a highly risk managed steel plant and a poorly risk managed steel plant in India get almost the same rates), can a reinsurer like FM succeed?

I am pleasantly surprised when I look at their number in first two and half years of their starting a Branch in India.

2022-23: Fire Premium: Rs 135 crores; Loss Ratio: 70%
2023-24: Fire Premium: Rs 218 crores; Loss ratio :36%
2024-25 (first half year-upto sept 2024):
Premium: Rs 87 crores, Loss ratio: 24%,

A good lesson for all Property underwriters that even in India, with proper risk selection, highly profitable fire portfolio can be created.

Volume is vanity, Profit is sanity.

Blog by Atmaram Cheruvu