Fire Insurance Syllabus (NIILM University) PDF

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MEDIA mathematics HEALTH ENGINEERING management DESIGN GEOGRAPHY E EDUCATION MUSIC ART C PHYSICS O law L O agriculture BIOTECHNOLOGY G Y LANGUAGE CHEMISTRY history MECHANICS psychology Fire Insurance Subject: FIRE INSURANCE Credits: 4 SYLLABUS Introduction: History of Fire Insurance; Need, Purpose & Functions of Fire Insurance, Application of basic principles, Subject matter of fire insurance, Introduction to All India Fire Tariff; Classification of Risks; Building Rules; FEA Rules/ Discount, Low-Claim Discount, Categorization of Hazardous Goods; Hazards of Speciatic Trades and Industries Fire & Spl. Peril Policy: Scope: In built causes/perils; Add on Covers; Exclusions: property, Causes and Perils; Conditions; Special Policies and Clauses; IAR Policy : Scope Rating & other aspects; Warranties and their importance; Underwriting Aspects and applications; Rating of fire Risks (Industrial & Non industrial); Rating of Add on Perils; Fixing of Sum Insured for various Subject Matters; Fire Hazards and Fire Prevention: Hazard Based Risk Classification – Originating Hazards – Contributory Hazards – Hazards Originating from Construction – Constructional Features – Silent Risk – Hazards Arising from Goods – Miscellaneous Hazards – Fire Protection Systems – Good Housekeeping. Erstwhile Tariff Rules & Rating: The Standard Fire & Special Perils Policy – Partial Insurance – Short Period Rates – Cancellation of Policies – Mid-term Cover – Rating – Simple Risks – List of Hazardous Goods – Industrial & Manufacturing Risks – Utilities – Storage Risks – Classification of Goods – Tanks & Gas Holders, Documents: Information through Proposal Form – Risk Inspection Report – Premium – Cover Note – Warranties & Clauses – Policy Schedule – Endorsements – Renewal Notice, Underwriting: Definition of Underwriting – Classification of Underwriting Factors - Large Volume of Business – Selection of Business – Fixing Retentions – Reinsurance Objectives & Types – Proportional Treaties – Non Proportional Treaties – Indian Fire Reinsurance Programme – Guidelines on File & Use Procedures – Reinventing the Principles of Underwriting – Corporate Governance Claims Legal Aspects: Essentials of Processing & Settlement of Claims – Duties of the Insured – Onus of Proof – Doctrine of Proximate Cause – Insured perils – Excepted Perils – Rights of Insurers – Warranties – Ex-gratia Payments – Without Prejudice – Rules of Interpretation – Amount of Claim Payable – Meaning of Value in Relation to Buildings / Machinery / Furniture, Fixtures, Fittings / Stocks / Household Goods & Personal Effects – Salvage – Contribution – Subrogation – Pro-rata Average, Suggested Reading: 1. Diane L. Oswald, Fire Insurance Maps: Their History and Applications, Lacewing Press 2. Lester W. Zartman, Fire Insurance, William S. Hein & Company, 3. John Oakes, A.J. Oakes, Fire Insurance Risks and Claims, Wiley-Blackwell  Fire Insurance Introduction: History of Fire Insurance; Need, Purpose & Functions of Fire Insurance, Application of basic principles, Subject matter of fire insurance, Introduction to All India Fire Tariff; Classification of Risks; Building Rules; FEA Rules/ Discount, Low-Claim Discount, Categorization of Hazardous Goods; Hazards of Speciatic Trades and Industries Fire & Spl. Peril Policy: Scope: In built causes/perils; Add on Covers; Exclusions: property, Causes and Perils; Conditions; Special Policies and Clauses; IAR Policy : Scope Rating & other aspects; Warranties and their importance; Underwriting Aspects and applications; Rating of fire Risks (Industrial & Non industrial); Rating of Add on Perils; Fixing of Sum Insured for various Subject Matters; Fire Hazards and Fire Prevention: Hazard Based Risk Classification – Originating Hazards – Contributory Hazards – Hazards Originating from Construction – Constructional Features – Silent Risk – Hazards Arising from Goods – Miscellaneous Hazards – Fire Protection Systems – Good Housekeeping. Erstwhile Tariff Rules & Rating: The Standard Fire & Special Perils Policy – Partial Insurance – Short Period Rates – Cancellation of Policies – Mid-term Cover – Rating – Simple Risks – List of Hazardous Goods – Industrial & Manufacturing Risks – Utilities – Storage Risks – Classification of Goods – Tanks & Gas Holders, Documents: Information through Proposal Form – Risk Inspection Report – Premium – Cover Note – Warranties & Clauses – Policy Schedule – Endorsements – Renewal Notice, Underwriting: Definition of Underwriting – Classification of Underwriting Factors - Large Volume of Business – Selection of Business – Fixing Retentions – Reinsurance Objectives & Types – Proportional Treaties – Non Proportional Treaties – Indian Fire Reinsurance Programme – Guidelines on File & Use Procedures – Reinventing the Principles of Underwriting – Corporate Governance Claims Legal Aspects: Essentials of Processing & Settlement of Claims – Duties of the Insured – Onus of Proof – Doctrine of Proximate Cause – Insured perils – Excepted Perils – Rights of Insurers – Warranties – Ex-gratia Payments – Without Prejudice – Rules of Interpretation – Amount of Claim Payable – Meaning of Value in Relation to Buildings / Machinery / Furniture, Fixtures, Fittings / Stocks / Household Goods & Personal Effects – Salvage – Contribution – Subrogation – Pro-rata Average, Introduction: A fire insurance is a contract under which the insurer in return for a consideration (premium) agrees to indemnify the insured for the financial loss which the latter may suffer due to destruction of or damage to property or goods, caused by fire, during a specified period. The contract specifies the maximum amount, agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This amount is not, however , the measure of the loss. The loss can be ascertained only after the fire has occurred. The insurer is liable to make good the actual amount of loss not exceeding the maximum amount fixed under the policy. A fire insurance policy cannot be assigned without the permission of the insurer because the insured must have insurable interest in the property at the time of contract as well as at the time of loss. The insurable interest in goods may arise out on account of (i) ownership, (ii) possession, or (iii) contract. A person with a limited interest in a property or goods may insure them to cover not only his own interest but also the interest of others in them. Under fire insurance, the following persons have insurable interest in the subject matter:-  Owner  Mortgagee  Pawnee  Pawn broker  Official receiver or assignee in insolvency proceedings  Warehouse keeper in the goods of customer  A person in lawful possession e.g. common carrier, wharfing, commission agent. The term 'fire' is used in its popular and literal sense and means a fire which has 'broken bounds'. 'Fire' which is used for domestic or manufacturing purposes is not fire as long as it is confined within usual limits. In the fire insurance policy, 'Fire' means the production of light and heat by combustion or burning. Thus, fire, must result from actual ignition and the resulting loss must be proximately caused by such ignition. The phrase 'loss or damage by fire' also includes the loss or damage caused by efforts to extinguish fire. The types of losses covered by fire insurance are:-  Goods spoiled or property damaged by water used to extinguish the fire.  Pulling down of adjacent premises by the fire brigade in order to prevent the progress of flame.  Breakage of goods in the process of their removal from the building where fire is raging e.g. damage caused by throwing furniture out of window.  Wages paid to persons employed for extinguishing fire. The types of losses not covered by a fire insurance policy are:-  loss due to fire caused by earthquake, invasion, act of foreign enemy, hostilities or war, civil strife, riots, mutiny, martial law, military rising or rebellion or insurrection.  loss caused by subterranean (underground) fire.  loss caused by burning of property by order of any public authority.  loss by theft during or after the occurrence of fire.  loss or damage to property caused by its own fermentation or spontaneous combustion e.g. exploding of a bomb due to an inherent defect in it.  loss or damage by lightening or explosion is not covered unless these cause actual ignition which spread into fire. A claim for loss by fire must satisfy the following conditions:-  The loss must be caused by actual fire or ignition and not just by high temperature.  The proximate cause of loss should be fire.  The loss or damage must relate to subject matter of policy.  The ignition must be either of the goods or of the premises where goods are kept.  The fire must be accidental, not intentional. If the fire is caused through a  malicious or deliberate act of the insured or his agents, the insurer will not be liable for the loss. Types of Fire Insurance Policies:-  Specific policy:- is a policy which covers the loss up to a specific amount which is less than the real value of the property. The actual value of the property is not taken into consideration while determining the amount of indemnity. Such a policy is not subject to 'average clause'. 'Average clause' is a clause by which the insured is called upon to bear a portion of the loss himself. The main object of the clause is to check under-insurance, to encourage full insurance and to impress upon the property owners to get their property accurately valued before insurance. If the insurer has inserted an average clause, the policy is known as "Average Policy".  Comprehensive policy:- is also known as 'all in one' policy and covers risks like fire, theft, burglary, third party risks, etc. It may also cover loss of profits during the period the business remains closed due to fire.  Valued policy: - is a departure from the contract of indemnity. Under it the insured can recover a fixed amount agreed to at the time the policy is taken. In the event of loss, only the fixed amount is payable, irrespective of the actual amount of loss.  Floating policy:- is a policy which covers loss by fire caused to property belonging to the same person but located at different places under a single sum and for one premium. Such a policy might cover goods lying in two warehouses at two different locations. This policy is always subject to 'average clause'.  Replacement or Re-instatement policy:- is a policy in which the insurer inserts a re-instatement clause, whereby he undertakes to pay the cost of replacement of the property damaged or destroyed by fire. Thus, he may re-instate or replace the property instead of paying cash. In such a policy, the insurer has to select one of the two alternatives, i.e. either to pay cash or to replace the property, and afterwards he cannot change to the other option. History of Fire Insurance A fire at a business can devastate a business. The structure may be damaged beyond repair. Business revenues are disrupted as the business cannot remain open. In the United States in 2006 there were 1.6 million fires reported resulting in $11.3 billion in direct property loss. It is a risk that must be insured against. Most property insurance policies and business owner policies cover fire losses. Most business property insurance policies are broad form policies. These policies list a number of perils that are covered by the policy and exclude perils that are not covered. Fire insurance means insurance against any loss caused by fire. Section 2(61 of the Insurance Act defines fire insurance as follows: ―Fire insurance business means the business of effecting, otherwise than incidentally to some other class of business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.‖ However, fire insurance can be purchased as a specific peril policy or the coverage increased by a specific endorsement. It is important for the business owner to understand what is not covered under a traditional broad form policy and ways to increase coverage. It is important to review what appropriate considerations when reducing premiums are and what not effective ways to save premiums are. Insure for the Proper Valuation: Many small business owners find that if they insure for an amount less than what the business is worth, premiums are lower. This is true. However, insurers require as a condition of the policy that the business is insured for a value equal to the actual value of the business. If it is not, and a loss occurs, a penalty is applied to the settlement amount. This penalty will almost always exceed the value of any saved premium and will come at a very bad time. Always insure for 100% of the business value.  Have an independent evaluation of the business by an independent appraiser each year and adjust coverage as necessary. Do not rely on property tax evaluations or guesses from your insurance professional. Actual Cash Value versus Replacement Cost: Most policies cover a fire loss with actual cash value or ACV instead of replacement cost. Actual cash value pays the amount of the property less depreciation. This can be devastating if your business relies upon high value equipment that has a long useful life, but would be prohibitively expensive to replace. As examples: coolers, refrigerators, tow lifts, aircraft or anything that would be prohibitively expensive to buy new. Replacement coverage pays the amount to replace the property lost at whatever the replacement cost is today. Replacement coverage carries higher premiums and can be purchased as a rider or endorsement. Consider the following when considering ACV vs. replacement coverage. Your business may be underinsured if it cannot replace critical facilities and equipment at the depreciated value. Electronics such as computers frequently decline in real replacement cost such that actual cash value may be a better option. Property valuations are frequent causes of conflict between insurers and insured. You can avoid valuation problems by carrying replacement coverage. Certain Property Needs Separate Coverage: Cash, valuable papers, certain types of inventory, some electronics, jewelry, and other items will require separate coverage or will be excluded from coverage. These are generally items that are impossible for the insurer to confirm and are prone to fraud. Business Interruption Insurance: Fire insurance does not cover "downtime" for your business nor does it cover temporary relocation. Your business needs business interruption insurance to insure against the loss of revenue accompanying a fire and any potential relocation costs. Business interruption is a separate policy and should be considered if your business will be destroyed by being closed. Coverage to Rebuild According to Current Building Code many businesses work in buildings or structures that are older than current building codes. In some cases, the structures are "grandfathered" in and do not have to comply with current modern standards. When a fire occurs the new construction must meet those standards. To the extent the insurer holds that such new standards are an improvement on the past structure, there is no coverage. If you have a historic building or do business in a rapidly changing area, you will want to make sure you have coverage to rebuild according to current building codes. This is often a separate endorsement or rider to the policy. Other Points to Consider: You will want to review your policy annually. Make sure accurate addresses are reflected on the policy and all endorsements and riders. Sometimes if you own many buildings a blanket fire policy covering all of the structures can save significant premiums. Finally, always have a fire plan in place and train your employees appropriately. Insurers often provide discounts for active fire prevention programs. Properties that are covered: All moveable/ immoveable properties of the proposer on land (excluding those in transit) broadly categorized as follows: i. Building (including plinth and foundations, if required): Whether completed or in course of construction (excluding the value of land). Interiors, Partitions and Electricals. Plant & Machinery, Equipments & Accessories (including foundations, if required) Bought Second hand. Bought New Obsolete Machinery Stocks: Raw Material Finished Goods In process In trade belonging to Wholesaler, Manufacturer and Retailer. Other Contents such as Furniture, Fixtures and Fittings Cables, Piping‘s Spares, Tools and Stores Household goods etc. Specific Items such as bullion, unset precious stones, curios, work of arts, manuscripts, plans, drawings, securities, obligations or documents, stamps, coins or paper money, cheques, books of accounts, computer system records, explosives. Special types of Policies available for Stocks: a. Declaration Policy: To care of frequent fluctuations in Stocks/ Stock Values Minimum Sum Insured Rs. 1 crore per location. Monthly declaration on any one of the following basis to be submitted before the last day of the succeeding month. 1. Average of the highest values at risk on each day (or) Highest value on any day of the month. 2. Refund of premium, on expiry of policy, based on the average declaration upto 50% of the provisional premium. b. Floater Policy: To take care of frequent changes in values at various locations. Single sum insured for all the stocks in all the locations. Nominal premium loading to cover all the stocks in all the locations. Perils Covered: Fire Lightning Explosion / Implosion Aircraft damage  Riot, Strike, Malicious and Terrorism damage (hereinafter called RSMTD Perils) Storm, Tempest, Flood, Inundation, Hurricane, Cyclone, Typhoon and Tornado. Impact by any Rail/ Road vehicle or animal. Subsidence / Landslide including rockslide. Bursting and / or overflowing of water tanks, apparatus. Leakage form Automatic Sprinkler Installation. Missile Testing Operation. Pollution or contamination resulting from any of the above perils. Any insured peril resulting from pollution and contamination. Bush Fire. Expenses Covered: The policy automatically covers the following expenses incurred following loss/ damage/destruction of a covered property as a result of the operation of an insured peril. i. Architects, Surveyors and Consulting Engineers' Fees up to 3 % of the claim amount. ii. Expenses incurred for removal of debris to clear the site up to 1 % of the claim amount. Exclusions Applicable: a. Losses/ Expenses not covered: i.5% of each and every claim subject to minimum of Rs.10,000 resulting from Lightning, STFI and Subsidence and Landslide including Rockslide and Rs.10,000 in respect of all other perils. ii. Expenses incurred on Architects, Surveyors' Consultant Engineers fees and Debris Removal in excess of 3% and 1% of claim amount respectively. iii. Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind. b. Perils not covered: i. War and allied perils. ii. Ionizing radiations and contamination by radioactivity. iii. Pollution or Contamination c. Properties not covered: i. Items like manuscripts etc. unless specifically declared. ii. Cold storage stocks due to change of temperature. iii. Loss / damage/ destruction of any electrical and/or electronic machine, apparatus, fixture or fitting arising from over running, excessive pressure, short circuiting, arcing, self heating or leakage of electricity, from whatever cause including lightning. iv. Loss / damage / destruction of Boilers, Economizers or other Vessels in which steam is generated machinery or apparatus subject to Centrifugal force, by its own explosion/ implosion. Location of Risk: i. The proposer shall describe all locations where the properties are built or installed or stored or kept at the inception. ii. Any change of location of risk shall be covered on intimation of such change. iii. Change of ownership in the insured property shall be intimated so that the new owner may be covered be means of suitable endorsement. iv. Any material change in the location of risk, trade or manufacturing activities shall be intimated to the insurer so that the changes are endorsed to offer continuous cover. Period of Coverage: i. Fire Policy is an annual policy, generally, renewable each year. ii. Long Term policy (for a minimum period of three years) can be considered for covering "dwellings" only with suitable discounts in premium. iii. Cover for STFI and RSMTD perils can be considered during currency (where they are deleted at inception by choice) in special circumstances. iv. Policy can be cancelled at any time during the currency with suitable refund of premium for the unexpired period. Deletion of Perils at the inception: STFI and RSMTD perils can be deleted at the inception of the policy for which suitable reduction in package premium rate is allowed. Add on covers In addition to the perils/ expenses covered, the proposer can opt to seek cover in respect of the following perils/ expenses at inception or during currency of the policy on payment of additional premium: Perils: Loss/ damage/ destruction of the property caused by- Deterioration of Stocks in Cold Storage premises due to power failure following damage due to an insured peril. Forest Fire. Impact Damage due to Insured's own Vehicles, Forklifts and the like and articles dropped there from. Spontaneous Combustion. Omission to insure additions, alterations or extensions. Earthquake (Fire and Shock). Spoilage material damage cover. Leakage and contamination cover. Temporary removal of stocks. Expenses: Architects, Surveyors and Consulting Engineer's Fees (in excess of 3% claim amount) Debris Removal (in excess of 1% of claim amount) Loss of rent. Insurance of additional expenses of rent for alternative accommodation. Start up Expenses. How to select the sum insured Sum Insured of a property should represent the Market Value. Where more than one building (and contents) are insured under a single policy, block wise values shall be furnished in respect of Building, Plant & Machinery, Stocks and other contents. In case the value of a property increases due to factors like increase in prime cost, Exchange rate etc. during the currency of the policy, the corresponding sum insured may be increased on payment of proportionate premium. Similarly, any reduction in sum insured during currency may be effected for which refund of premium will be allowed on short period basis. Characteristics of Fire Insurance 1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of the actual loss suffered. If there is no loss there is no liability even if there is a fire. 2. Fire insurance is a contract of good faith. The policy-holder and the insurer must disclose all the material facts known to them. 3. Fire insurance policy is usually made for one year only. The policy can be renewed according to the terms of the policy. 4. The contract of insurance is embodied in a policy called the fire policy. Such policies usually cover specific properties for a specified period. 5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable interest in the property covered. Such interest must exist at the time when the loss occurs. In English cases it has been held that the following persons have insurable interest for the purposes of fire insurance- owner; tenants, bailees, including carriers; mortgages and charge-holders. 6. In case of several policies for the same property, each insurer is entitled to contribution from the others. After a loss occurs and payment is made, the insurer is subrogated to the rights and interests of the policy-holder. An insurer can reinsure a part of the risk. 7. Fire policies cover losses caused proximately by fire. The term loss by fire is interpreted liberally. Example: A women hid her jewellery under the coal in her fireplace. Later on she forgot about the jewellery and lit the fire. The jewellery was damaged. Held, she could recover under the fire policy. 8. Nothing can be recovered under a fire policy if the fire is caused by a deliberate act of policy-holder. In such cases the policy-holder is liable to criminal prosecution. 9. Fire policies generally contain a condition that the insurer will not be liable if the fire is caused by riot, civil disturbances, war and explosions. In the absence of any specific expectation the insurer is liable for all losses caused by fire, whatever may be the causes of the fire.  10. Assignment: According to English law a policy of fire insurance can be assigned only with the consent of the insurer. In India such consent is not necessary and the policy can be assigned as a chose-in-action under the Transfer of Property Act. The insurer is bound when notice is given to him. But the assignee cannot be recovering damages unless he has an insurable interest in the property at the time when the loss occurs. A stranger cannot sue on a fire policy. 11. Payment of Claims: Fire policies generally contain a clause providing that upon the occurrence of fire the insurer shall be immediately notified so that the insurer can take steps to salvage the remainder of the property and can also determine the extent of the loss. Insurance companies keep experts on their staff of value the loss. If in a policy there is an international over valuation of the property by the policy-holder, the policy may be avoided on the ground of fraud. Types of Fire Policies There may be various types of fire policies. The principal types are described below: Specific Policy A specific policy is one under which the liability of the insurer is limited to a specified sum which is less than the value of property. Valued Policy A valued policy is one under which the insurer agrees to pay a specific sum irrespective of the actual loss suffered. A valued policy is not a contract of indemnity. Average Policy Where a property is insured for a sum which is less than its value, the policy may contain a clause that the insurer shall not be liable to pay the full loss but only that proportion of the loss which the amount insured for, bears to the full value of the property. Such a clause is called the average clause and policies containing an average clause are called average policies. The phrase ―subject to average‖ is equivalent to the insertion of an average clause. ―Lloyd‘s Fire Policies are usually expressed to be ―subject to average‖. Reinstatement or replacement Policy In such policies the insurer undertakes to pay no the value of the property lost, but the cost of replacement of the property destroyed or damaged. The insurer may retain an option to replace the property instead of paying cash. Floating Policy When one policy covers property situated in different places it is called a floating policy. Floating policies are always subject to an average clause. Combined Policies A single policy may cover losses due to a variety of cases, e.g. fire together with burglary, third party losses, etc. A fire policy may include loss of profits, i.e. the insurer may undertake to indemnify the policy holder not only for the loss caused by fire but also for the loss of profits for the period during which the establishment concerned is kept closed owing to the fire. Fire insurance is a form of property insurance which protects people from the costs incurred by fires. When a structure is covered by fire insurance, the insurance policy will pay out in the event that the structure is damaged or destroyed by fire. Some standard property insurance policies include fire insurance in their coverage, while in other cases, fire insurance may need to be purchased separately. Property owners should check with their insurance companies if they are not sure whether or not fire insurance is part of their policies, and if fire insurance is not included, it should be purchased. Depending on the terms of the policy, fire insurance may pay out the actual value of the property after the fire, or it may pay out the replacement value. In a replacement value policy, the structure will be replaced in the event of a fire, whether it has depreciated or appreciated: in other words, if homeowners purchase a home and the value increases, as long as it is covered by a replacement value policy, the insurance company will replace it. An actual cash value policy covers the structure, less depreciation. Most accounts come with coverage limits which may need to be adjusted as property values rise and fall. Depending on the terms of the policy, the contents of the home as well as the structure may be covered in the event of a fire. Some policies also provide a living allowance which allows the victims of a fire to rent temporary housing while their homes are repaired. These clauses in an insurance policy typically cause the policy to become more expensive, since they will represent additional costs to the insurance company in the event of a fire. However, they can be extremely useful if a fire occurs. The cost of fire insurance varies widely. The use of fire alarms, sprinkler systems, and other safety measures can decrease the cost of the policy, and may even be required for some policies. Living in a region prone to wildfires will increase the cost of the insurance, as the risk of a payout is greatly increased. Because many people purchase fire insurance for their homes and businesses, insurance companies have a large risk pool, making fire insurance less expensive than specialized insurance like earthquake or flood insurance. When purchasing fire insurance, people should be aware that some types of fires may not be covered. For example, a fire caused by an earthquake might be excluded from a fire insurance policy, as might a fire caused by an act of God. It is important to read the terms of the policy carefully, and to ask for clarification from the insurance representative if the terms are not clear. If a policy does not appear to meet the need, it should be renegotiated until it is satisfactory. Principles of Fire Insurance: The principal types of fire insurance policies are given below: 1. Valued policy When the agreed value of the subject matter is mentioned in the policy is named as valued policy. This value may not necessarily be the actual value of the property. In the event of toss by fire the insurer pays the admitted value of the property. 2. Unvalued policy An unvalued policy in one in which the value of the subject matter is not declared at the time of policy taken. But in case of loss the value is computed by assessment. This is also called an open policy. 3. Specific policy In case of specific policy, the property is insured for a definite sum. If there is loss, the stated amount will have to be paid to the policyholder. But the actual value of the subject matter is not considered in this respect. For examples if a policy is taken for Rupees 20,000 upon a building whose actual value is Rs.1, 00,000 and afire occurs causing the amount of loss Rs.20, 000. The insurance company will pay the whole amount of loss of Rs.20, 000 irrespective of the fact that the building was insured for one-fifth of its value. 4. Average policy An average policy is one which contains the average clause. This clause required the insurance company to pay only that portion of the loss which is borne by the insured amount to the actual value of the subject matter of the insurance. For example a value of the property is Rs.1, 00,000. It is insured for Rs.60, 000 (60% of the total value) and the amount of loss is Rs.60, 000. The insurance company will not pay Rs.60, 000 to the policyholder but will pay Rs.36, 000 (60% of Rs.60, 000). 5. Floating policy A floating policy is that which covers the fluctuating risk of several goods lying in different localities for supply to various markets. Such a policy is usually taken out under one sum and one premium by the businessman whose goods are lying at docks and warehouses. 6. Stock declaration policy This policy is taken for covering the stock where great fluctuations in the value can happen throughout the contract period. On such policy 75% of the premium has to be deposited in advance. The maximum liability of insurance company is specified in the policy by the insured. At the end of year the average stock and final premium is calculated. 7. Loss of profit policy Such type of policy covers the loss of profit which sustains as a result of fire. This policy is also known as consequential loss policy. 8. Standard fire policy This policy is issued for compensation of all direct loss or damage caused by lighting and burning. Such policy also covers damages by earthquake, hair flood, explosion, cyclone and riot. 9. Reinstatement policy Under this policy insurance company pays more than the actual value of the property destroyed by fire in order to cover the cost of replacement of the said property. It is also called as ―Replacement Policy‖. This type of policy is not very common in these days. 10. Schedule Policy A schedule policy is one which insures many properties under collective terms and conditions, Details of the properties and their respective rates of premium are listed in one policy only for the convenience of the insured. 11. Sprinkler leakage policy This type of policy covers the loss of building as a result of the damage by the leakage of liquid or water. 12. Excess policy This policy is issued for the stock of merchandise whose value is constantly fluctuating. In such case it is not suitable to take one policy for certain sum. So the insured takes an ordinary policy for minimum value of the stock and excess policy for excess value of the stock. The actual value of the stock will be reported periodically 13. Maximum value with Discount policy Under this policy one third discount of the premium paid is refundable to the insured at the maturity of the policy. This policy covers the risk for maximum amount. Importance Of Fire Insurance Fire insurance is the type of insurance coverage, in which an individual pays some sum of money to the company, in exchange to receive advantages for the fireplace losses. Fire insurance provides the security for home, share, home furniture, enterprise buildings, etc,. Fireplace insurance provides the price of alternative of properties and assets, which gets broken due to the fireplace incident. Fire insurance provides the advantages for the homeowner in these ways It provides the price of damage for the building It provides the rc, if any home furnishings are damaged due to the fireplace incident, like plywood home furniture, carpets, clothes. It provides alternative or maintenance price for the electronic items, which is broken due to fireplace, like television, computer, air coolers. Fire insurance provides advantages to the enterprise in the following way It covers the price of share broken due to the fire It provides the loss of life advantages to employee, in case of loss of life occurred due to the fireplace incident. It provides the alternative or maintenance price for the machines, if they get broken due to fireplace incident. It provides the medical expenses for the employees, if they get injured due to the fireplace incident. The expectations of living have definitely modified with the times and this only indicates that more people look for any paths that can lead to benefits. With there being so many kinds of insurance available in the market, some select to leave fireplace insurance, stating that the threats of a fireplace developing are more distant, than say a center. Protecting property or home from fireplace is essential, more so if you know the chance of one developing is very real. Mature qualities usually bring more possibility with them. Their age predisposes them to have some substandard electrical wiring, or some leaking plumbing, which would all end up producing a fireplace. Modern, latest qualities are at less possibility, but random shoots can happen, like during hefty stormy weather when super hits. A fireplace insurance coverage protects for the harm due to a fireplace in two ways. One is paying out the sum of money comparative to the value of the home or business, after the fireplace is out. The other is by getting together with the costs of changing the piece of property or home, and in this case, that indicates fixing and restocking. It‘s bad enough when your home uses up down due to some inevitable incident, but when you do not have an insurance plan to help you move back to your typical life, its even more intense. With that being said, it is well to consider the significance of a fireplace insurance plan, especially if you know you cannot manage to change the home in your own financial initiatives. You get a chance to explain the essentials of the insurance plan you want, showing what you want protected in the insurance plan, and what to be overlooked. If you cannot get your kind of insurance plan with one insurance provider, there are always so many others to select from. Importance of Fire Insurance for Businesses No type of risk is more dangerous than fireplace and arson that intends enterprise building in the Business. This is why high-risk enterprise qualities like dining establishments are recommended to take additional fireplace insurance to make sure they are well ready for such harmful activities. Basically, fireplace insurance can provide complete take care of against fireplace and smoking damage to the property and its items. Since the actual features and price of take care of will differ on the level of take care of you used for, it is important to make sure that you are effectively protected. Thus, conditions and insurance plan information must be tested before carrying out to a replace insurance coverage. Furthermore, there are other accessories that go with fireplace insurance that you have to involve in your take care of. Although they will price you a little bit more on charges, these will confirm to be important in the future. Such involve legal take care of, personal belongings, and old for new take care of. Just take be aware of administration accepted fireplace protection products that you can use, which will help bring down the price of your fireplace expenses. Need for Fire Insurance: Fire accidents are very much unexpected but heavily destructive. Hence, having fire insurance is very much essential. Fire Insurance policy covers your home‘s structure, or fixing and fittings, against hazard and provides you with the financial resources to replace what you have lost, so that you can get back to normal as soon as possible. If the worst were to happen and your house burned down, where would you go, knowing that you have relatives who will pitch in to help you out during such a difficult time is great, but if you don‘t have those resources, what would you do? This is where you need a fire insurance policy. Fire insurance provides the security for home, stock, furniture, business buildings, etc; it provides the cost of replacement of properties and assets, which gets damaged due to the fire accident. For example, if your home is destroyed or damaged enough by a fire to the point that it renders you homeless, a fire insurance policy will often pay for the reasonable increase in your living expenses, such as the additional cost of hotel stays, restaurant bills, etc. Secondly, if you had property worth N1 million, then the insurance firm can be able to restore you to the same old position, gaining back your momentum is very easy as you just have to rebuild what you had once more. Benefits of having fire insurance It is bad enough when your house burns down due to some unavoidable accident, but when you don‘t have an insurance cover to help you slide back to your normal life, it‘s even worse. With that being said, it is well to consider the importance of a fire insurance cover, especially if you know you cannot afford to replace the house in your own financial efforts. One of the major benefits of fire insurance in general is coverage of belongings that are destroyed in a fire. This includes major appliances within the home, furnishings, clothing, jewelries, and other items of value that are specifically covered within the terms of the policy. Fire insurance provides the price of damage for the building, if any home furnishing is damaged due to the fire incident, it provides alternative maintenance price for the electronic items like television, computer, air conditioners, which is destroyed by fire. Having fire insurance can save you from financial disaster. Along with replacement and reimbursement of lost belongings, fire insurance can also provide financial assistance in finding a new place to live and compensating the insured party for losses not covered under a homeowner insurance plan. Your home is probably your most valuable asset. Failing to insure it against fire damage could put you in a precarious financial situation if you leave yourself no recourse in the event of a fire. You‘ve worked hard all your life to have the things that you deserve why put all of that in jeopardy by failing to have adequate insurance coverage for fire? Fire is a commonplace occurrence, but this doesn‘t mean that it is destined to happen to you. But if it does, having fire insurance to help cover your financial losses. It is a critical safety net that nobody should do without. Basic Principles: The following are the fundamental principles essential for a valid contract of fire insurance. 1. A contract of indemnity: Its object is to place insured as far as possible in the same financial position after a loss as that occupied immediately before the loss. The insured can recover only the amount of actual loss subject to the sum assured. 2. Insurable Interest: In fire insurance the insurable interest must exist at the time of affecting the insurance as well as at the time of the loss. The interest, however, may be legal or equitable or may arise under a contract of purchase or sale. The following have been held to have insurable interest in the subject matter : 1. Owner 2. Mortgagee  3. Trustee 4. Executor 5. Warehouseman 6. Common 7. Bailee 8. Pledgee 9. Person in lawful possession 10. Finder 11. Insurer 12. Commission Agent where the agency is coupled with interest and 13. Tenants who are liable to pay rent after a fire. It should however, be noted that persons can insure only to the extent of such limited interest. 3. Contract of Good Faith: The contract of fire insurance is a contract of Uberrimae fidei i.e., a contract based upon absolute good faith, and therefore, the insured must make full and detailed disclosure of all material facts likely to affect the judgement of fire officials in determining the rates of premium or deciding whether the proposal should be accepted. The description of the property, when asked for, should be correctly give, and all information that may be required as to the class of goods and articles that are kept on the premises or in the surrounding neighborhood, should be accurately supplied. 4. Loss Through Fire: Loss resulting from fire of some other cause which is the proximate cause is the risk covered under a fire insurance contract. But where the fire is caused by the insured himself or with his connivance or by the operation of a peril specifically excluded under the policy like earthquake, the loss will not be covered. 5. A Contract from Year to Year: A fire insurance policy is usually for one year only and can be renewed after that. 6. Principles of Subrogation and Contribution: Subrogation is a doctrine applicable to both fire and marine insurance by which the insurer or underwriter, becomes entitled to on his paying compensation to the insure, to claim the advantage of  every right of the insured against third parties who may be proved to be responsible for that loss, owning to such third parties negligence, default etc. Where the subject matter has been insured with more than one insurer, each insurer has to meet the loss only ratably. If he has paid more than his share of loss, he is entitled to recover the excess paid from his co insurers. Thus, the principle of contribution applies in the case of fire insurance. Once Fire Insurance Principle The basic principles that govern Fire Insurance are: (i) Utmost good faith - In insurance contracts, the legal doctrine of utmost good faith applies. The insured has the duty to disclose all material facts, which have a bearing on the insurance. A breach of this duty may make the contract void or voidable. The duty of disclosure continues throughout the policy period. The fire proposal form also includes a declaration by the insured saying that the statements declared by him are true, and that they can form the basis of the insurance contract. These principles also expect the insured to act as if he is uninsured all the time, and takes care and safeguards his assets from the perils. Following a loss, he is then expected to salvage as much of the property as possible. (ii) Insurable Interest - The requirement of insurable interest gives legal validity to insurance contracts and distinguishes them from wagers. It may be defined as the legal right to insure, where the right arises out of a pecuniary relationship between the insured and the subject matters of insurance. The destruction or damage to the latter involves the insured in financial loss. Absolute legal ownership is a clear example of insurable interest. For e.g., a bank or a financial institution which has advanced money on the security of a property, has insurable interest in that property. In Fire insurance policy, the insurable interest should exist at the time of taking the policy, throughout its currency period and also at the time of loss/claim. Fire insurance policies are personal contracts, Â so if the property is sold or transferred, the policy is not transferred automatically. (iii) Indemnity - The objective of the principle is to place the insured, as far as possible, in the same financial position after a loss, as that occupied by him, immediately before the loss. In simple words, the principle of indemnity means the insured is indemnified only to the extent of his loss, no profit or undue benefit is extended. The indemnity is subject to the sum insured and other terms of the policy. The sum insured can be fixed on the basis of Reinstatement Value or Market Value. The term 'Market value' means, for insurance purposes, the present cost of construction of similar buildings, after deducting depreciation based on age, usage, maintenance etc. Similarly for plant and machinery, market value is arrived at by deducting suitable depreciation for age, usage, wear and tear etc, from the current replacement costs. In all the cases, depreciation refers to the actual intrinsic physical depreciation and not those used for accounting purposes. (iv) Subrogation - The principal of subrogation is the corollary of the principle of indemnity. If the loss suffered by the insured can be recovered from third parties who are responsible for the loss, the insured's rights of recovery are transferred or subrogated to the insurers when they indemnify the loss. (v) Contribution - The principle of contribution, which is also a corollary of the principle of indemnity, provides that if the same property is insured under more than one policy, the insured can recover a rate able proportion of the loss under each policy. Under no circumstances can he recover more than his loss, and make a profit. (vi) Proximate cause - A cause which immediately precedes and produces the effect, as distinguished from the remote, mediate, or predisposing cause. An act from which a loss or injury results as a natural, direct, uninterrupted consequence and without which the loss or injury would not have occurred. It is the primary cause of a loss or injury. It is not necessarily the closest cause in time or space or the first event that sets in motion a sequence of events leading to an injury. Everyone faces some degree of risk in various aspects of their life. It may be through death, or destruction or even loss of property. The insured then has to pay premiums in order to keep their cover active. Failing to contribute such amounts may lead to an insured not being compensated. There are many generally accepted principles of insurance that insurance companies strictly enforce. When applying for the cover, it is mandatory to disclose all material information truthfully to the best of your knowledge. This is called the principle of ultimate good faith or full disclosure. Information obtained in such instances is used to estimate the level of risk that an applicant is exposed to thus setting of amount of premiums. This is one of the most important principles of insurance since without this, the insurance contract would be null and void. All successful applicants must also pay premiums regularly as stipulated in the policy document. Paying such payments in time ensures that issues related with denial of compensation are avoided. Since this is the price for cover, it must be paid prior to acquiring a cover. This means that those who do not pay are not covered. When insured risks happen, the policy holder is entitled to compensation of up to an amount equal to the value of the cover. Therefore, people are not entitled to gain from such arrangements. When a cover relates to property that is replaced by the insurer, any wreckage or scrap is transforms to be owned by the insurer. Anyone who has insurable interest to any property is the only one entitled to take a cover for its risks. This means that the person whose name appears in the title documents must sign for the cover to be valid. Failing to follow this rule leads to automatic denial of compensation when an insured risk happens. The cover is only active up to a certain period of time. Property insurance may last for one year or less after which the cover has to be renewed for the policy holder to remain covered. Premiums are therefore active up to the date specified on the cover certificate. Life cover is however not governed by the principle of subrogation since human life cannot be valued in monetary terms. The risk against which the loss is insured must happen so as to warrant any compensation. This is called the principle of proximal cause. For instance, when a cover has been taken against fire, the insured can only be compensated when any loss sustained is closely related to fire or is actually a fire. Therefore occurrence of any other loss causing event does not warrant compensation. Subject Matter of Fire Insurance: Subject matter of fire insurance may be of any kind of movable and immovable property having pecuniary value. The property intended to be insured must be properly described. As per fire insurance, it is governed by Tariff; the following are the examples of insurable property such as: 1. Building 2. Electrical installation in buildings 3. Contents of buildings such as machinery, plant and equipments, accessories etc. 4. Good (raw materials, work in progress, semi finished goods, finished goods, packaging materials) in factories and go downs. 5. Good in open 6. Contents in dwellings, shops, hotels, etc. 7. Furniture, fixture and Fittings 8. Pipelines (including contents) located inside or outside the compound etc. Introduction to All India Fire Tariff This Tariff applies to ―Erection All Risks/ Storage Cum Erection Insurance‖ Rating of Risks with Sum Insured up to Rs. 100 cores. (Risks with Sum Insured above Rs. 100 crores and up to Rs. 1500 cores shall be rated by Insurers as per guidelines issued vide Circular 2001/7 dated 1st January, 2001, Rules for Fire Protection - I) Minimum Compulsory Requirements applicable to all risks irrespective of Sum Insured - i) One portable fire extinguisher of Soda Acid or Water type for every 300 sq. m of storage/erection site area or small bore hose reels as per Relevant Section of Fire Protection Manual of TAC shall be provided. The location of fire extinguishers shall be conspicuously marked by clearly visible signs. Checking and maintenances at regular intervals shall be recorded. ii) Trained fire fighting squad shall be maintained for the site. iii) Watch and Ward facility shall be provided round the clock at the site/premises. iv) One fire engine of 400 GPM x 100 PSI shall always be stationed at site. Note - Not applicable to policy with Sum Insured up to Rs. 50 crores v) Materials and equipments stored in buildings (sheds) or in open area shall be divided into sub-units with the value, which shall not exceed 10% of the sum insured or Rs. 50 Crores whichever is less. Wherever value of single equipment stored exceeds this limit, its value shall be taken as the limit. The sub-units in open area shall be separated from each other by a distance of at least 15 m. In case of storage buildings, firewalls of 9" thickness carried up to roof shall be erected without any wall openings between the sub- units. vi) Packing materials, scaffolding etc. combustible materials and liquids and explosive substances should be stored at a 30 M safe distance from other buildings, plants and stores. vii) Utmost attention should be paid to good housekeeping such as - Orderly storage; Periodic removal of combustible packing material, either by burning on site at a safe distance of 100 M or removal from the site; Clean-up of site at least once a week; viii) Open flame work (welding, cutting etc.) requires utmost caution. All combustible materials lying around must be removed or covered. ix) Grass and/or any other vegetation in and around the site are regularly removed. x) "No smoking" rules must be enforced in areas exposed to fire (stores etc.) and in the vicinity of hazardous operations. xi) Living quarters should be well separated (100 M away) from construction site. xii) In addition to above, the following fire prevention measures are recommended: a) The site is secured by properly constructed fence. b) Temporary buildings (offices, rest rooms, material stores etc.) be made of non - combustible materials. Classification of Risk Risk: Risk may be defined as: The possibility of events, or combinations of events, occurring which have an adverse impact on the economic value of an enterprise as well as the uncertainty over the outcome of past events. It follows that any risk classification system should start by considering what the ―economic value‖ of an enterprise is. The Working Party considered the following definition of economic value:  Embedded Value comprising: Shareholder net assets (assets less liabilities) plus Value In-Force (VIF) – the value of existing business relating to future income less costs, including the cost of capital (covering both regulatory and other capital requirements as well as economic capital) and the impact of taxes. Plus Goodwill relating to (a) the value of future new business, plus (b) future initiatives to: Drive down costs, improve persistency and improve the risk: reward profile plus/minus various other frictional and structural items such as Agency Costs. Risk classification refers to the use of observable characteristics such as gender, race, beh avior, or the outcome of genetic tests to price or structure insurance policies. Risk classifi cation helps insurers classify selected risks when underwriting. It allows them to group in dividual risks with similar expected medical costs, compute the corresponding insurance premiums, and reduce adverse selection (and potential moral hazard). Only risk character istics correlated with expected claim costs are useful for underwriting. Information on individual risk is seldom used to determine individual participation in em ployer‐ or government‐sponsored plans, but is often observed in voluntary plans and in lo ng‐term insurance markets, where it serves to define accessibility, classify policyholders i n homogenous risk classes, and set the premiums of each risk class. From this, we arrive at the following high level risk categories: Market Risk – the risk that as a result of market movements, a firm may be exposed to fluctuations in the value of its assets, the amount of its liabilities, or the income from its assets; Credit Risk – the risk of loss a firm is exposed to if a counterparty fails to perform its contractual obligations (including failure to perform them in a timely manner) including losses from downgrades and other adverse changes to the likelihood of counterparty failure; Insurance and Demographic Risk – the risk of adverse variation in life and general insurer and pension fund claim experience as well as more general exposure to adverse persistency and other demographic experience, and including adverse changes to assumptions as to future experience; Operational Risk – the risk of loss, resulting from inadequate or failed internal processes, people and systems, or from external events. Liquidity Risk The high level categories cover threats to the quantum of embedded value i.e. threats to the amount of realistic assets in excess of realistic liabilities. However, solvency is based not just on the amount of assets relative to liabilities but also to how liquid these are. If assets are not sufficiently liquid, they may have to be sold at a discount to market value to meet liabilities as they fall due and/or a firm may have to borrow to cover the shortfall in liquid funds, giving rise to interest costs. In extremis, a firm may find itself unable to meet liabilities as they fall due. There is thus the need to consider the liquidity as well as the amount of assets relative to liabilities and thus we need to add a high level category for Liquidity Risk which is defined as: The risk that a firm, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost. Risk to Goodwill – Strategy Risk The categories considered so far relate to existing assets and liabilities and the embedded value arising from these, but a large component of a firm‘s economic value relates to goodwill in respect of future new business and initiatives to extract greater value from the existing book of business. Thus a separate Strategy Risk category has been added to cover threats to the realisation of the goodwill of a firm in relation to future new business as well as future projects/initiatives to: reduce costs, improve persistency and optimize risk profile. This will cover Risks leading to actual strategic outcomes differing adversely to expectations; Risks which may inhibit strategy and strategic choices; and The risk that the strategy chosen is sub-optimal. The risk that strategy is sub-optimal includes Agency Risk where the interests of management are not aligned with the owners of a firm. Inter alia, Strategy Risks include threats which may compromise the value of the firm‘s brand and its ability to leverage this to write profitable new business. Aggregation and Diversification Risk It is important in considering risk to look not just at the individual components but how they come together as a whole. Risks may be super-additive, with the combined impact greater than the sum of the individual parts. More often than not, risks are sub-additive with risks unlikely to crystallize to the same extent simultaneously. Firms allow for this diversification benefit in assessing capital requirements, but there is a risk that the combined impact may be greater than expected i.e. that the diversification benefit is less than expected. Thus the common risk classification system has a final, over-arching high-level category for Aggregation and Diversification Risk which is defined as: The risk that the aggregate of risks across individual categories is greater than the sum of the individual parts and/or that anticipated diversification benefits are not fully realized. Note that aggregation and diversification is also considered as a sub-set of each high- level category e.g. Market Risk will include an Aggregation and Diversification Risk category to address the combined impact of individual market risks such as equities and property. However this high-level category will consider impact across the other high- level categories e.g. between Market and Operational Risks. To summaries, based on the view of risk outlined above, the common risk classification system has high-level categories for: Market Risk Credit Risk Insurance and Demographic Risk  Operational Risk Liquidity Risk Strategy Risk Frictional Risk and Aggregation and Diversification Risk MARKET RISK Market Risk categories The definition of Market Risk is based on the FSA‘s definition in INSPRU 3.1.5G which also notes that: ―Sources of general market risk include movements in interest rates, equities, exchange rates and real estate prices‖ This gives rise to Equity, Interest Rate, Foreign Exchange and Property Risk categories of Market Risk. In addition: Interest Rate Risk is further split out with a separate Real Interest Rate Risk category covering movements in real yields and hence implied inflation; There is also a separate Inflation Risk category to cover adverse movements in actual (as opposed to implied) inflation rates and in rates of earnings inflation; A Swap Spread Risk category covers movements between Gilt and swap rates, while a Bond Spread Risk category covers the widening of corporate bond spreads over the risk- free rate; A Commodity Risk category covers adverse movements in commodity prices; There is an Alternative Investments category to cover the risks associated with Infrastructure and other alternative investments. The categories of Market Risk above can be further broken down into: Specific risk (or ―Alpha‖) relating to an individual share, bond or property; Sector impacts e.g. telecom shares, regional office property markets; General market impacts (or ―Beta‖) – split domestic and overseas markets; Income risk relating to dividend and rent variability Implied volatility of options for that particular asset class; Model Risk relating to changes in the value of derivatives for a particular asset class due to changing models of that asset class; and  Basis Risk relating to differences between exposures hedged and hedge assets. Demarcation and other issues In their work on Market Risk classification, the Working Party identified the following issues including potential areas of overlap with other risks: Movements in equity and other futures and forward prices may be driven in part by interest rate changes but we would propose that equity, commodity etc. futures and forward price changes be considered under Equity Risk, Commodity Risk etc.. Should Private Equity be included under Equity Risk or as a standalone category? The common risk classification system assumes the former on the basis that exit values will ultimately be related to the wider equity market, but an argument can be made for the latter given the infrequency and subjectivity of valuations. Interest Rate Risk relates to movements in the risk-free rate – but what is this? Gilts? Swaps? The Working Party opted for swap rates as the regulatory definition of risk free rates may be based on swap rates under Solvency II. Also while Gilts may be considered risk-free in a UK context, the same may not be said of Euro-zone sovereign bond yields. Movements in bond spreads need to be split between general changes in spreads (Market Risk) and widening spreads as a result of the default or downgrade of individual bonds (which should come under Credit Risk). A possible demarcation approach may be to consider bonds downgraded / defaulting separately from other bonds. However a complication is that the market may anticipate bond defaults and downgrades and may have already priced these in prior to default / downgrade. CREDIT RISK Credit Risk categories Twenty-eight categories of Credit Risk have been identified, broadly by source of Credit risk. Credit Risk variables For each Credit Risk, the following variables are generally considered: Probability of Default (PD); Exposure at Default (EAD) – e.g. balance outstanding for credit card defaults;  Loss Given Default (LGD – allowing for collateral & other recoveries; and Migration Risk – adverse variances in transitions between credit ratings e.g. higher than expected downgrades for bonds, or for personal loans, greater than expected transition to lower internal credit ratings requiring an increase in bad debt provisions. 6.3 Credit Risk sub-categories Credit Risks may be broken down further by variable or by category as follows: Model Risk e.g. increases in bad debt provisions due to change in LGD models; Process Risk due to random fluctuations including concentrations of exposure to a single counterparty for that category of Credit Risk; Parameter Estimation Risk relating to statistical estimation error; Regional / Sub-portfolio impacts e.g. the impact of a regional downturn in property prices on that part of a mortgage portfolio exposed to that region; Domestic Shocks e.g. general economic downturn, or a change in rating agency practice leading to mass downgrades; and Overseas Shocks e.g. currency restrictions preventing repayment, or an adverse change of government. INSURANCE AND DEMOGRAPHIC RISK Insurance and Demographic Risk categories Twenty-eight categories of Insurance and Demographic Risk have been identified, broadly based on Solvency II categories in Life and Non-Life Underwriting Risk Modules. Insurance and Demographic Risk variables For life insurance, the key risk relates to claim frequency as the severity of the claim will usually be known. However, for general insurance, the situation is complicated by (a) uncertainty of claim severity and (b) the long-tail between occurrence, reporting and settlement that can exist in many classes of business. Thus for general insurance, the following variables are generally considered:  Claim Frequency, Prospective – relating to uncertainty over the number of claims yet to occur; Claim Frequency, IBNR – relating to uncertainty over the number of claims that have been incurred but have yet to be reported; Claim Severity, Prospective – relating to uncertainty over the severity of claims yet to occur; Claims Severity, Claims reported but not settled – relating to uncertainty over the severity of claims reported but which have still to be settled (i.e. their number is known but not their ultimate severity); and Claim Severity, IBNR – relating to uncertainty over the severity of claims that have been incurred but which have yet to be reported. Insurance and Demographic Risk sub-categories Insurance and Demographic Risks may be broken down further by variable or by category as follows: Model Risk – e.g. increases in reserves due to new models of severity; Process Risk – due to random fluctuations including concentration risk to an individual exposure (e.g. a pension scheme‘s exposure to a CEO‘s longevity); Parameter Risk – arising from statistical estimation errors; Heterogeneity Risk – relating to heterogeneity within risk groups used to set expectations, with variations in the profile of each risk group distorting experience (e.g. where mortality rates are split only by age and sex, variations in the proportion of smokers within each age and sex band); Trend Risk – relating to the rate of change being different from expected; Endogenous Shocks – risk of step-changes in experience due to internal changes e.g. changes in underwriting standards; Exogenous Shocks – risk of step-changes in experience due to external factors e.g. changes in non-disclosure law, or an adverse legal ruling; and Catastrophe – risk of catastrophic claim events e.g. multiple death claims from a flu pandemic; or multiple property and motor claims from a windstorm. This compromises two areas of uncertainty: the frequency of catastrophic events and how many excess claims each event generates. Demarcation and other issues In their work on Insurance and Demographic Risks classification, the Working Party identified the following issues including potential areas of overlap with other risks: Perils such as fire will have a direct impact on businesses affected as well on an insurance company, but this direct impact is covered under Damage to Physical Assets under Operational Risk. Similarly non-insurer own firm exposure to product liability, environmental damage, health and safety and other insurable losses is also covered under Operational Risk. Non-disclosure – this may be viewed as a form of fraud (Operational Risk) but could also be due to say poor wording of underwriting questions. We would include non- disclosure under Insurance and Demographic Risk as unless detected, it will be implicit in claim experience. OPERATIONAL RISK Definition of Operational Loss In defining Operational Risks, a considerable area of uncertainty relates to what exactly constitutes an operational loss. The Working Party has worked on the basis that operational losses include overtime and temporary staff recruited to solve a problem but not the cost of existing of staff that may be switched to problem solving i.e. marginal costs only. Operational losses would also include lost future income e.g. from regulatory challenges to charges, which might impair embedded value. LIQUIDITY RISK Liquidity Risk losses To define what constitutes Liquidity Risk, there is a need to consider the adverse consequences of having insufficient liquidity. Aside from not being able to meet liabilities as they fall due, Liquidity Risk can give rise to losses in respect of: Assets realized for less than balance sheet value in order to meet liabilities, possibly at ―fire sale‖ prices; and Interest on borrowing to tide over liquidity shortfalls. There is a question to what extent borrowing costs should constitute liquidity losses, given that borrowing defers the due date of payment, and there will be a time value benefit to this. The Working Party argue that only the excess interest over base rates on borrowings (net of tax relief) should count towards liquidity losses. Liquidity Risk categories The Working Party has identified seven categories of Liquidity Risk, namely: Non-discretionary Liability Related Outflows e.g. maturities; Discretionary Liability Related Outflows e.g. surrenders; Asset related outflows e.g. margin calls on derivatives; Corporate Outflows e.g. dividend payments; Impairment of Liquid Resources e.g. reduced marketability of listed securities; or suspension of money market funds where liquid funds are held; Frictional Strains – risk that a firm, while having adequate liquidity overall, experiences a liquidity shortages in particular currency, subsidiary or fund (e.g. open-ended property fund); and Aggregation of Strains – reflecting the fact that whiles a firm may be able to withstand individual strains; the combination of strains can prove too much. STRATEGY RISK Strategy Risk categories Strategy Risk categories identified by the Working Party are set out in Appendix I, but these can be broadly split out into: Exogenous factors relating to external threats to strategy and the realization of goodwill, and which would include: o Impact of markets and economic conditions on sales Tax and Regulatory impacts such as Capital Gains Tax changes and the Retail Distribution Review (RDR) Actions of competitors Endogenous factors relating to internal constraints and failings and including: o  Quality of products and services offered Project failures e.g. failure to launch new product Endogenous factors include Brand and Reputation Risk relating not only to reputation impacts (e.g. perception of poor financial strength; reputation damage of miss selling and other operational events) but also whether our brand supports our strategy. It should be noted that reputation damage may be self-inflicted (e.g. Ratners) without any underlying operational failing. FRICTIONAL RISK This would include categories for: a) Regulatory capital rule changes which increase capital requirements and hence the economic cost of capital borne by a firm; b) Accounting rule changes having the same effect as a) and/or restricting the ability to pay dividends to shareholders; c) Changes in rating agency requirements having the same effect as a) – where the firm wishes to maintain its rating; d) Problems caused by operating structure, including: lack of fungibility of capital in subsidiaries e.g. cannot transfer excess capital in one subsidiary to cover a shortfall in another; changes in corporate structure adversely affect capital requirements; problems in a subsidiary having a ―knock on‖ impact on other subsidiaries whom it provides services for; e) Tax changes including the impact on embedded value of changes to corporation and income tax and VAT, as well as own portfolio impacts affecting the rate of tax paid (e.g. life insurer moving into an ―excess E‖ position); and f) Increases in economic capital requirements. FEA Rules/ Discount Section I: General Rules and Regulations Policy Fire business is governed by All India Fire Tariff. Only standard Fire and special perils policy with the permitted ―Add on‖ covers can be issued. Unless otherwise specifically provided for, this Tariff is applicable to land-based properties only. Any risk, which has not been provided for in the Tariff shall be referred to the Committee for rating, Provisional rate of Rs.2.50 per mile shall be charged in such cases for covering the risks under Standard Fire and Special Perils Policy. No discounts shall be allowed on this rate. Value Policies Valued policy (ies) can be issued only for properties whose market value cannot be ascertained, e.g. Curios, Works of Art, Manuscripts, Obsolete machinery and the like subject to the valuation certificate being submitted and found acceptable by the insurers. Long Term Policies Fire policies for a period exceeding 12 months shall not be issued ―Except for Dwellings‖. Long term policies shall be issued to house/flat owners only based on either of the following 2 methods subject to the conditions below: The policy shall be issued for a minimum period of 3 years. No refund shall be allowed for mid-term cancellation of such policies. Mid-term inclusion of perils shall be not be allowed. Premium for entire policy period shall be collected in advance. Method A: Premium shall be charged in full without any discount. However sum insured under the policy shall be deemed to have increased by 10% of the original sum insured at the end of the every 12 month periods. Method B: There shall be not nay automatic increase in sum insured as in method A. however appropriate discounts shall be allowed on applicable gross premium as per table below. DURATION OF POLICY PREMIUM TO BE CHARGED 3 years policy 3 years premium in advance less 15% discount 4 years policy 4 years premium in advance less 20% discount 5 years policy 5 years premium in advance less 25% discount 6 years policy 6 years premium in advance less 30% discount 7 years policy 7 years premium in advance less 35% discount DURATION OF POLICY PREMIUM TO BE CHARGED 8 years policy 8 years premium in advance less 40% discount 9 years policy 9 years premium in advance less 45% discount 10 years & above Entire premium in advance less 50% discount Mid Term Cover: Generally it is not permissible to grant mid-term cover for STFI and/or RSMD perils. The following provisions shall apply, where such covers are granted mid-term. Insurers must receive specific advice from the insurance accompanied by payment of the required additional premium in cash or by draft. This additional premium shall not be adjusted against existing Cash deposits or debited to Bank guarantee. Mid-term cover shall be granted for the entire property at one complex compound location cover9ing the entire interest of the insured under the one or more policy (ies). Insured shall not have any option for selection. Cover shall commence 15days after the receipt of the premium. The premium rates as under shall be charged on short period scale on full sum insured at one complex/compound/location covering the entire interest of the insured for the balance period up to the expiry of the policy. SECTION VI MID-TERM SECTION SECTION IV INCLUSION OF III MATERIALS IN MATERIALS V AND VII GODOWN IN OPEN STFI 0.20% 0.35% 2.00%.35% RSMD 0.15 0.15% 0.15% 0.15% Payment of Premium Premium shall be paid in full and shall not be accepted in installments or by deferred payments in any form. Minimum Premium Minimum premium shall be Rs.100/- per policy except for risks ratable under Section III and Tiny Sector Industries under section IV in which cases the minimum premium shall be Rs.50/- per policy. Partial Insurance It is not permissible To issue a policy covering only certain portions of a building Not withstanding this, the plinth and foundations or only the foundation of a building may be excluded. To issue a policy covering only specified machinery(except boilers) parts of machine or accessories there of housed in the same block/building. Rates for short Period Insurance Polices for a period of less than 12 months shall be issued at the rates set out hereunder. For a period not exceeding 15 days 10% of the Annual rate -do- 1 month 15% of the annual rate -do- 2 month 30% of the annual rate -do- 3 month 30% of the annual rate -do- 4 month 40% of the annual rate -do- 5 month 50% of the annual rate -do- 6 month 60% of the annual rate -do- 7 month 70% of the annual rate -do- 8 month 75% of the annual rate -do- 9 month 80% of the annual rate For a period exceeding 9 month The full annual rate Loading for “DUTCHA” CONSTRUCTION Buildings‘ having walls and or roofs of wooden planks/thatched leaves and/or grass/hay of any kind/bamboo plastic cloth/asphalt cloth /canvas/tarpaulin and the like shall be treated of ―Kutcha‖ Construction for rating. An additional rate of Rs. 4.00% shall be charged for such buildings and/ or contents thereof. RULES FOR CANCELLATIONS For cancellation of insurance policy at the option of the insured. Retention of premium shall be at short period scale for the period the policy has been in force, subject of the retention of minimum by the insurer. During the currency, if a policy is replaced with the same insurer by a new annual one covering the identical property, refund of the premium may be allowed on pro-rate basis at the original rates for the sum insured replaced. Fir the sum insured not replaced, refund must be calculated after charging premium at short period scale on such sum for the time the insurance has been in force subject to retention of the minimum premium by the insurer. In case of short period policies, premium shall be retained at a the applicable short period scale. For cancellation of insurance policy at the option of the insurer, refund of premium shall be on pro-rate basis for the unexpired term. MID-TERM REVISION IN SUM INSURED: Midterm revision in sum insured shall be allowed as follows: Increase in sum insured: on pro-rata basis. Decrease in sum insured on short-period scale Escalation Clause It will be in order for insurers to allow automatic regular increase in the Sum insured throughout the period of the policy in return for an additional premium to be paid in advance. The terms and conditions for this extension shall be as follows: The selected percentage increase shall not exceed 25% of the sum insured. The additional premium, payable in advance, shall; be at 50% of the final rate, to be charged on the selected percentage increase.  The sum insured at any point of time would be assessed after application of the escalation clause. Escalation clause shall apply to policies covering building, Machinery and Accessories only and shall not apply to policies covering stock. Escalation clause shall apply to all policies issued on reinstatement value basis. Pro-rata condition of average shall continue to apply as usual The automatic increase operates from the date of inception upto the date of operation of any of the insured perils. Low-Claim Discount Finite risk insurance is the term applied within the insurance industry to describe an alternative risk transfer product that is typically a multi-year insurance contract where the insurer bears limited underwriting, credit, investment and timing risk. The assessment of risk is often conservative. The insurer and the insured share in the net profit of the transaction, including loss experience and investment income. The premium is generally well in excess of the present value of a conservative estimate of loss experience. The policy generally contains retrospective rating provisions such as Commutation provisions, Additional premium provisions, or An experience account Finite risk insurance excludes products expressly sold as annuities. The term "blended finite risk insurance" is often used to describe an insurance product that has the characteristics of finite risk, but with more risk transfer included than generally is the case for finite risk. While there is no bright line test for risk transfer, the distinction would be most readily noted in the premium for blended finite risk insurance, which must be less than the present value of a conservative estimate of loss experience by a readily noticeable degree. Important Terms "Additional premium provision" means, in the context of finite risk insurance, a provision of an insurance or reinsurance contract that requires or strongly encourages the insured to pay the insurer some calculable amount as a result of losses paid or incurred under that insurance or reinsurance contract, excluding provisions for additional premium due to changes in exposure or policy audit. "Commutation provision" means a verbal or written agreement, whether or not formally incorporated into an insurance or reinsurance policy, that allows the policyholder to commute the policy, usually implying that all liabilities and rights created by that contract are extinguished in return for the balance of an experience account. Generally provisions such as "profit sharing" or "low claims bonus," which also produce a return of premium that can be reduced by claims payments, are not considered Commutation Provisions if they do not extinguish the contract. Loss-based return and additional premium provisions in conventional loss-based rating plans, e.g., incurred loss retrospectively rated insurance and so-called "retention plans" used commonly in insuring US Workers' Compensation, are generally not considered Commutation Provisions for much the same reason. Sample language for such a provision might resemble this: Commutation by policy holder This policy may be commuted by the policyholder (the ―commutation‖) effective as of December 31, 200_ or on each two year anniversary of such date thereafter, upon not less than ninety (90) days advance written notice to the Insurer. The date of the Commutation (the "Commutation Date") shall be set forth in such notice. Effective the Commutation Date, the Policyholder and the Insurer, finally and irrevocably release each other from any and all liability and obligations to each other under or in connection with this Policy, whether billed or unbilled, whether reported or unreported and whether known or unknown; provided that, upon the Commutation, the Insurer shall pay to the Policyholder an amount equal to the Loss Experience Account. Such Loss Experience Account shall be due and payable to the Policyholder on the Commutation Date. "Experience account" when used in the context of finite risk refers to a provision in an insurance or reinsurance contract that, using some function of premium, insurer charges, losses paid or payable under the contract, subrogation proceeds, and interest rates, forms the basis of an explicit or notional fund that can then be used to calculate the amount due under a additional premium provision. An example, appropriate for a finite risk insurance policy, might look like this: Loss experience account A notional loss experience account will be created at the Inception Date, for use in evaluating amounts due under the commutation provision, which shall be updated annually thereafter as of the last day of each calendar year so long as this Policy remains in effect. The notional loss experience account will be determined as follows: 1. Beginning balance; minus 2. Payments of ultimate net loss made by the Insurer as of the immediately preceding loss payment date; plus 3. Interest income on any positive daily balance calculated using an interest rate equal to the one-year treasury rate effective on the inception date (for the first calculation) and effective at each one-year anniversary for each subsequent twelve month period. As of the inception date, the beginning balance will be equal to 100 percent of the premium, less brokerage fees, less the insurer margin. The beginning balance for each subsequent year will be the total of (1) through (3), above, from the prior year's calculation. Categorization of Hazardous Goods ‗Dangerous goods‘ are materials or items with hazardous properties which, if not properly controlled, present a potential hazard to human health and safety, infrastructure and/ or their means of transport. Dangerous goods are solids, liquids, or gases that can harm people, other living organisms, property, or the environment. They are often subject to chemical regulations. In the United States and sometimes in Canada dangerous goods are more commonly known as hazardous materials, (abbreviated as HAZMAT or HazMat). "HazMat teams" are personnel specially trained to handle dangerous goods. Radioactive, flammable, explosive, corrosive, oxidizing, asphyxiating, biohazardous,toxi c pathogenic, or allergenic. Also included are physical conditions such as compressed gases and liquids or hot materials, including all goods containing such materials or chemicals, or may have other characteristics that render them hazardous in specific circumstances. In the United States, dangerous goods are often indicated by diamond-shaped signage on the item (see NFPA 704), its container, and/or the building where it is stored. The colors of each diamond in a way has reference to its hazard i.e.: Flammable = red because fire and heat are generally of red color, Explosive = orange, because mixing red (flammable) with yellow (oxidizing agent) creates orange. Non-flammable Non-toxic Gas = green, due to all compressed air vessels being this color in France after World War II. France is where the diamond system of HazMat identification originated. The transportation of dangerous goods is controlled and governed by a variety of different regulatory regimes, operating at both the national and international levels. Prominent regulatory frameworks for the transportation of dangerous goods include the United Nations Recommendations on the Transport of Dangerous Goods, ICAO‘s Technical Instructions, IATA‘s Dangerous Goods Regulations and the IMO‘s International Maritime Dangerous Goods Code. Collectively, these regulatory regimes mandate the means by which dangerous goods are to be handled, packaged, labeled and transported. Regulatory frameworks incorporate comprehensive classification systems of hazards to provide taxonomy of dangerous goods. Classification of dangerous goods is broken down into nine classes according to the type of danger materials or items present, click on a class to read more details; 1. Explosives 2. Gases 3. Flammable Liquid 4. Flammable Solid  5. Oxidizing Substance 6. Toxic & Infectious Substance 7. Radioactive Material 8. Corrosive 9. Miscellaneous Dangerous Goods The multitude of dangerous goods regimes across the world and the complexity of dangerous goods classifications and regulations render compliance a particularly difficult task. However DGI, as a logistics company specializing in dangerous goods, is well placed to deliver tailored solutions to all customers‘ dangerous goods needs. DGI is proficient in all nine classes of dangerous goods and provides a range of services including packaging, packing, labeling, freight forwarding and training. CLASS 1 – EXPLOSIVES Explosives are materials or items which have the ability to rapidly conflagrate or detonate as a consequence of chemical reaction. Sub-Divisions Division 1.1: Substances and articles which have a mass explosion hazard Division 1.2: Substances and articles which have a projection hazard but not a mass explosion hazard Division 1.3: Substances and articles which have a fire hazard and either a minor blast hazard or a minor projection hazard or both Division 1.4: Substances and articles which present no significant hazard; only a small hazard in the event of ignition or initiation during transport with any effects largely confined to the package Division 1.5: Very insensitive substances which have a mass explosion hazard Division 1.6: Extremely insensitive articles which do not have a mass explosion hazard Reason for Regulation Explosives are capable by chemical reaction of producing gases at temperatures, pressures and speeds as to cause catastrophic damage through force and/or of producing otherwise hazardous amounts of heat, light, sound, gas or smoke. Commonly Transported Explosives 1. Ammunition/cartridges 2. Fireworks/pyrotechnics 3. Flares 4. Blasting caps / detonators 5. Fuse 6. Primers 7. Explosive charges (blasting, demolition etc) 8. Detonating cord 9. Air bag inflators 10. Igniters 11. Rockets 12. TNT / TNT compositions 13. RDX / RDX compositions 14. PETN / PETN compositions DGI DGI are proficient in handling explosives, Class 1 Dangerous Goods. DGI have the ability to service all customer requests pertaining to the logistics of explosives; packing, packaging, compliance, freight forwarding and training. CLASS 2 – GASES Gases are defined by dangerous goods regulations as substances which have a vapor pressure of 300 kPa or greater at 50°c or which are completely gaseous at 20°c at standard atmospheric pressure, and items containing these substances. The class encompasses compressed gases, liquefied gases, dissolved gases, refrigerated liquefied gases, mixtures of one or more gases with one or more vapors of substances of other classes, articles charged with a gas and aerosols. Sub-Divisions Division 2.1: Flammable gases Division 2.2: Non-flammable, non-toxic gases Division 2.3: Toxic gases Reason for Regulation Gases are capable of posing serious hazards due to their flammability, potential as asphyxiates, ability to oxidize and/or their toxicity or corrosiveness to humans. Commonly Transported Gases 1. Aerosols 2. Compressed air 3. Hydrocarbon gas-powered devices 4. Fire extinguishers 5. Gas cartridges 6. Fertilizer ammoniating solution 7. Insecticide gases 8. Refrigerant gases 9. Lighters 10. Acetylene / Oxyacetylene 11. Carbon dioxide 12. Helium / helium compounds 13. Hydrogen / hydrogen compounds 14. Oxygen / oxygen compounds 15. Nitrogen / nitrogen compounds 16. Natural gas 17. Oil gas 18. Petroleum gases 19. Butane  20. Propane 21. Ethane 22. Methane 23. Diethyl ether 24. Propane / propylene 25. Ethylene DGI DGI are proficient in handling gases, Class 2 Dangerous Goods. DGI have the ability to service all customer requests pertaining to the logistics of gases; packing, packaging, compliance, freight forwarding and training. CLASS 3 – FLAMMABLE LIQUIDS Flammable liquids are defined by dangerous goods regulations as liquids, mixtures of liquids or liquids containing solids in solution or suspension which give off a flammable vapor (have a flash point) at temperatures of not more than 60-65°C, liquids offered for transport at temperatures at or above their flash point or substances transported at elevated temperatures in a liquid state and which give off a flammable vapor at a temperature at or below the maximum transport temperature. Sub-Divisions There are no subdivisions within Class 3, Flammable Liquids. Reason for Regulation Flammable liquids are capable of posing serious hazards due to their volatility, combustibility and potential in causing or propagating severe conflagrations. Commonly Transported Flammable Liquids 1. Acetone / acetone oils 2. Adhesives 3. Paints / lacquers / varnishes 4. Alcohols 5. Perfumery products 6. Gasoline / Petrol 7. Diesel fuel 8. Aviation fuel 9. Liquid bio-fuels 10. Coal tar / coal tar distillates 11. Petroleum crude oil 12. Petroleum distillates 13. Gas oil 14. Shale oil 15. Heating oil 16. Kerosene 17. Resins 18. Tars 19. Turpentine 20. Carbamate insecticides 21. Organochlorine pesticides 22. Organophosphorus pesticides 23. Copper based pesticides 24. Esters 25. Ethers 26. Ethanol 27. Benzene 28. Butanols 29. Dichloropropenes 30. Diethyl ether 31. Isobutanols 32. Isopropyls 33. Methanol 34. Octanes  DGI DGI are proficient in handling flammable liquids, Class 3 Dangerous Goods. DGI have the ability to service all customer requests pertaining to the logistics of flammable liquids; packing, packaging, compliance, freight forwarding and training. CLASS 4 – FLAMMABLE SOLIDS; SUBSTANCES LIABLE TO SPONTANEOUS COMBUSTION; SUBSTANCES WHICH EMIT FLAMMABLE GASES WHEN IN CONTACT WITH WATER Flammable solids are materials which, under conditions encountered in transport, are readily combustible or may cause or contribute to fire through friction, self-reactive substances which are liable to undergo a strongly exothermic reaction or solid desensitized explosives. Also included are substances which are liable to spontaneous heating under normal transport conditions, or to heating up in contact with air, and are consequently liable to catch fire and substances which emit flammable gases or become spontaneously flammable when in contact with water. Sub-Divisions Division 4.1: Flammable solids Division 4.2: Substances liable to spontaneous combustion Division 4.3: Substances which, in contact with water, emit flammable gases Reason for Regulation Flammable solids are capable of posing serious hazards due to their volatility, combustibility and potential in causing or propagating severe conflagrations. Commonly Transported Flammable Solids; Spontaneous Combustibles; ‘Dangerous When Wet’ Materials 1. Alkali metals 2. Metal powders 3. Aluminum phosphate 4. Sodium batteries 5. Sodium cells 6. Firelighters 7. Matches 8. Calcium carbide 9. Camphor 10. Carbon 11. Activated carbon 12. Celluloid 13. Cerium 14. Copra 15. Seed cake 16. Oily cotton waste 17. Desensitized explosives 18. Oily fabrics 19. Oily fibers 20. Ferro cerium 21. Iron oxide (spent 22. Iron sponge/direct-reduced iron (spent) 23. Metaldehyde 24. Naphthalene 25. Nitrocellulose 26. Phosphorus 27. Sulphur DGI DGI are proficient in handling flammable solids, Class 4 Dangerous Goods. DGI have the ability to service all customer requests pertaining to the logistics of flammable solids; packing, packaging, compliance, freight forwarding and training.