In a bid to lower the premium for providing terrorism cover, Indian general insurers and the designated reinsurer, General Insurance Corporation of India (GIC), are coming together to create a mechanism to retain the premium in the country.
"We are trying to create a facility in India to retain up to Rs 250-Rs 300 crore of the probable maximum loss (PML)," a top executive from a general insurance company, said.
Sources said the Indian insurers would "appropriately" fix the premium for providing terrorism cover, which would be lower than those levied by the global reinsurers, and the premium would be retained in India.
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A team headed by New India Assurance chairman cum managing director K N Bhandari, who is also the president of the General Insurance (public sector) Association (Gipsa), is at present in London, holding talks with the global reinsurers to convince them that India should not be clubbed with other countries as the terrorism risk is much lower in the country.
"We are trying to tell them that Indian companies should not be made to pay for the incidents of September 11, as we have not been affected. The risk is much greater in the US and countries such as Israel and Algeria, while the conditions here are much different, and therefore, the terrorism premium in India should be lower," said an executive.
Sources said, education of the global reinsurers along with setting up of a facility in the country would help in reducing the premium for terrorism cover. "We expect the domestic facility to be in place in another 15-20 days," the executive said.
The September 11 attacks in the US, and the subsequent conflict in Afghanistan, resulted in a hardening of the reinsurance market and the war and terrorism premium was hiked. In certain business segments, such as aviation, a surcharge was levied and the cap on insurers' liability on third-party cover reduced. A number of mega-risk projects are at present without a terrorism cover.
Sources explained that 98 per cent of the Indian general insurance market is controlled by the four state-owned companies -- New India Assurance, Oriental Insurance, United India Insurance and National Insurance. They, along with GIC, would be largely instrumental in setting up the domestic facility. The details of the mechanism are being worked out.