Insurance cost for shipping firms falls further

General insurers were unable to reinsure marine hull risks underwritten last year as cut-throat competition after lifting of controls last year lead to over 50 per cent fall in premiums.

However, insurers have underwritten marine hull risks this year at a premium 10-30 per cent lower than last year. The marine hull insurance contracts are renewed on July 1 every year.

There is a rise in premium in case of fleet with bad claims experience, but shipping companies have seen a 20-30 per cent saving in insurance expenditure this year.

The marine hull risk was removed from the list of tariff-based general insurance businesses last year. Shipping Corporation of India (SCI) has seen its insurance premium burden falling to Rs 17.88 crore this year from Rs 22.65 crore in 2005 and Rs 50 crore in 2004.

SCI had insured 85 per cent of its fleet with Oriental Insurance and the remaining with ICICI Lombard General Insurance last year. This year, it opted only for Oriental and brought down its insurance cost by a further 21 per cent. SCI currently has 82 vessels in its fleet against 80 last year.

"We have got a reduction of 11.15 per cent on hull and machinery cover and 49 per cent on war risk cover," said S Hajara, chairman and managing director at SCI. SCI had bought the marine hull and machinery cover from United India Insurance for nearly Rs 50 crore in 2004.

A marine hull policy primarily deals with insurance of inland and ocean going vessels. The insurance depends on parameters such as a ship's age, gross tonnage, dead weight tonnage, value and trading area.

Major players in marine hull insurance business are Oriental Insurance, New India Assurance and ICICI Lombard General Insurance Company.

New India Assurance did a business of Rs 150 crore for marine hull insurance last year. The total premium collected by general insurers from marine hull insurance was about Rs 350 crore.