All companies are required to renew their insurance cover by Saturday, even as just 80 per cent of insurance covers actually fall due for renewal in the next financial year beginning Monday.
The companies have 48 hours left to decide on whether they wish to continue to be covered against terrorism. If they decide to go for it, they will have to pay the additional prescribed premium under their existing insurance policy at the rate of Rs 0.5 per Rs 1,000. Otherwise, insurance companies will cancel the existing terrorism cover under the plan.
From April 1, terrorism will not be automatically covered under fire and engineering policies, but will have to be paid for separately at a price. Smaller units whose value comes to a few hundred crores, as opposed to large-sized plants valued at thousands of crores, have told their respective insurance companies that they will not be interested in buying terrorism risk cover.
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Oil and power companies see terrorism as a real threat. They, with their huge plants, are seeking additional cover above the Rs 200-crore cap available in the Indian market today. General Insurance Corporation of India (GIC) executives are currently in London talking to Axa, Munich Re and Swiss Re to arrange for additional terrorism facility to cover risks over and above the Rs 200-crore cap.
Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Tata Power, Reliance Petroleum, and a host of large-sized firms are keen to take additional cover over and above the Rs 200-crore limit.
At present, in the eventuality of a mishap taking place as a result of terrorist attacks, insurance companies are not liable to pay any claims beyond Rs 200 crore per location, immaterial of the actual value of the property or size of damage.
The fear psychosis has not hit certain industry segments such as auto and engineering. Insurance officials said some companies such as Tata Steel and Tata Engineering have indicated that they may not seek to buy terrorism cover.
Talks are on to arrange for Rs 500 - 700-crore terrorist cover facility under GIC's excess of loss programme. Currently, the Indian market as a result of the pooling of capacities of the four state insurance companies provides coverage of terrorist risks up to Rs 200 crore per location at the rate of Rs 0.5 per Rs 1,000.
For coverage beyond Rs 200 crore, if GIC is successful in arranging the facility, corporates will have to pay additional premium to avail of this proposed risk capacity. According to various reinsurance brokers, the pricing for terrorist cover beyond Rs 200 crore and up to Rs 500 crore could be anywhere in the region of 0.1 to 0.5 per cent of the sum assured of an individual corporate entity.
Axa has given its quotation, while other reinsurance companies are still studying their capacities. How much additional risk-taking capacity under the pooling system GIC can arrange from the international reinsurance market and at what price will depend upon the availability of capacity and the best price offered. India, today, is not alone in the market seeking reinsurance facility as renewals for other countries -- Japan, Korea and the Philippines -- also falls on April 1.