Reliance has a cover for Rs 49,000 crore

Reliance Industries has a comprehensive "mega policy" covering property damage and loss of profit arising out of fire and allied perils.

Mega policies are those where the sum insured is more than Rs 10,000 crore at one location or the probable maximum loss (PML) is more than Rs 1,054 crore. These policies are driven by reinsurance.

"The total sum insured of the policy issued to RIL is Rs 49,000 crore. The sum insured of the property cover is Rs 29,000 crore, while the loss of profit is Rs 20,000 crore. RIL paid a premium of Rs 190 crore to the insurers," said M Ramadoss, chairman and managing director of Oriental Insurance, the co-insurer of the policy.

The policy was issued on October 1 by New India Assurance's office in Mumbai, which is the lead insurer sharing around 60 per cent of the risk, besides Oriental Insurance (15 per cent), ICICI Lombard (10 per cent), Bajaj Allianz (5 per cent), United India Insurance (5 per cent), National Insurance (5 per cent).

"We don't know the quantum of the claims. The company has covered a loss of profit of Rs 29,000 crore. But the first 30 days are excluded in the policy and it is called the deductible," Ramadoss said. This essentially means that the insurance cover for loss of profit will get activated from November 1. So, RIL will not be paid for loss of profit, if the plant remains shut till October 31.

The refinery fire is unlikely to hit the insurers, as they have adequately reinsured their risk with overseas reinsurers. Said R K Joshi, chairman of General Insurance Corporation of India (the domestic reinsurer), "The capacity of GIC and insurance companies is much larger than the claim of Reliance.

There is no cause of concern, as it is routine business. These losses demonstrate the importance of having adequate cover. Insurance industry is fully geared to underwrite and absorb this kind of risk. We should compliment RIL for having adequate insurance cover."