ONGC insurance premium doubles to $44 million

PSU filed claims for more than $300 million last year.

Oil and Natural Gas Corporation's insurance premium for the current year has doubled to $44 million (Rs 198 crore) because of the large claims made by it last year following a blow-out at a well and a major offshore platform accident.

ONGC's current insurance cover is up to $750 million (Rs 3,375 crore). The contract has been divided between the four state-owned general insurance companies- New India Assurance, United India Insurance, Oriental Insurance and National Insurance.

United India, the lead insurer, had underwritten 55 per cent of the risk, while the remaining three companies have evenly divided the underwriting for the balance, M Ramadoss, chairman-cum-managing director of Oriental Insurance, told Business Standard.

The sharp increase in the state-owned oil company's premium stemmed from the over $300 million (Rs 1,350 crore)-worth claims it filed last year, a senior executive said.

The claims were made following a major accident at ONGC's offshore platform in Bombay High in July 2005. Another accident which led to claims was the blow out soon after at the ONGC exploratory well PSAR drilled by E-1400-20 rig.

Oriental Insurance, in a recent presentation made to detail its financial results last fiscal, showed that ONGC's gross claims on it had been over Rs 200 crore. The net claims on Oriental was limited because the domestic general insurers were cushioned by the large reinsurance taken on the ONGC contract.

In the current year, the four general insurers have retained 6 per cent of the risk in the ONGC contract, and reinsured the balance.

In addition to the large claims made last year by ONGC, the current year's insurance premium may have also been influenced by ONGC's maintenance record.

The reinsurers were displeased with the "housekeeping" done by ONGC at its rigs, insurance industry executives said.

The claims made by the country's biggest oil company was not the first such instance. A few years ago, blow outs at its oil wells had led to similar large claims.