In a bid to avoid unpleasant surprises, private equity players and companies are demanding covers against changing tax rules. This has forced insurers in India to file for products like a tax liability cover, along with warranty and indemnity covers.
Insurers say the demand for such a cover shot up after the Vodafone tax case where the telecom major was subjected to a capital gains tax of $2 billion for buying $11.2 billion worth shares of Hutchison.
“There is a huge demand from private equity players and companies going global. In another three-six months, we expect to see these products in India,” said Marsh Managing Director and country head Sanjay Kedia.
He expects deal sizes to be in the range of $4-150 million.
Since these will be mega-risk policies, they will be mostly driven by reinsurance. In such cases, Indian insurance companies place 10 per cent of the risk with the national reinsurer, passing off the rest to international reinsurers. The premium will vary from 1 per cent to 5 per cent of the sum assured.
“Underwriting risks arising from changes in the tax structure of a particular country is not easy. We have to see if the insurance regulator allows these products,” said a senior executive of a large private insurance company.
