India’s terrorism risk pool has surged to a record Rs1,700 crore, the highest since the Mumbai terror attack on November 26, 2008, when claims worth Rs600 crore were disbursed.
Prior to the attack, the size of the pool was around Rs1,400 crore. “This is very good for the industry. The advantage of having such a pool was felt while settling the claims for the Mumbai terror attacks,” said Yogesh Lohiya, chairman and managing director, General Insurance Corporation of India.
The terrorism pool in India was set up in 2002 with an initial corpus of Rs200 crore after the 9/11 attack on the World Trade Centre in New York.
The corpus is set aside by the general insurance companies to ensure the bottom line of insurance companies does not take a hit when claims are made following a terror attack. The pool covers companies/institutions for a liability of Rs750 crore, including material or property loss or damage.
State-run General Insurance Corporation of India manages the pool and the entire premium collected under the terrorism risk by the industry is deposited to the pool.
Terrorism insurance is taken by property owners to cover any potential losses and liabilities that might occur on the event of a terrorist attack. It comes as an additional cover to all risks underwritten under fire, engineering and property damage.
Post November 2008, the premiums of the terror insurance policies have increased by around 25 per cent. The rates are uniform across the industry and are fixed by the pool committee.
Currently, the terror insurance premium for industrial establishments is 0.30 per cent of the total sum insured and for the housing units the rate is much lower at 0.10 per cent of the total sum insured. This means for a policy cover of Rs1 lakh, the premiums for terror insurance is Rs300 for industrial establishments and Rs100 for individual housing units.