Business Standard

No Blind Cover For Terror, Say Global Insurers

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BUSINESS STANDARD

The global insurance industry is in a frenzy over the January 1 renewals in the western hemisphere. Though renewals come up in the Indian market only on April 1, the local business is alreagy generating a lot of heat. The 10 per cent surcharge imposed on fire and engineering risks by the government, following the September 11 attacks, will be inadequate to meet the rising cost of terrorism cover.

Global reinsurers have informed Indian insurers that they will no longer blindly cover terrorism as a part of the cover. Terrorism insurance will now be excluded and will come at a price. The exact picture, however, will become clearer by March next year as Indian treaties come up for renewal on April 1.

 

Meanwhile, Haldia Petrochemicals has received notice of cancellation, withdrawing the terrorism cover midterm, said state insurers. "We are in the process of arranging a stand alone terrorism cover for the company," they added.

The country's first barged-based Tanvir Bawi power plant with an insurance cover worth Rs 900-crore, equally failed to receive full terrorism cover within the premium cost of the policy.

The insurers -- The New India Assurance Company, United Insurance Company, National Insurance Company, Royal Sundaram Alliance Insurance and Reliance General Insurance Company -- sought full protection at additional cost.

Withdrawal of terrorism cover however, is not taking place across the board. Some of the tariff covers like Maruti Udyog, Oswal Chemicals and Nagarjuna Fertilisers, which come up for renewal prior to March 31, have or will be automatically renewed with the terrorism support.

"Much depends upon the location and exposure to terrorism in that area. We will look at it on a case by case basis," said a leading reinsurance outfit. The real picture will emerge once treaties are renewed.

Reinsurance companies' own treaties come up for renewal from tomorrow (January 1). When they are not getting terrorism support, they are equally unlikely to provide India unlimited terrorism cover, reinsurers told Business Standard.

Said one broker: "Indian rates are no longer adequate as the international scenario has changed dramatically. At the same time, fire tariffs have been slashed and deductibles need an upward correction, but have remained unchanged".

Indian insurers are keeping their fingers crossed that prior to renewals of Indian treaties on April 1, 2002, India does not come under attack. India faced a similar situation nine years back following the bomb-blasts of March 12, 1993 in the country's financial capital. Said an official from the General Insurance Corporation of India (GIC): "Though negotiations on renewals had been almost concluded and signed, we had a hard time convincing the reinsurers to cover terrorism in India, explaining that the bomb-blasts had been an isolated incident".

India may not prove to be as lucky in the coming year in view of the damage September 11 attacks has had on the global insurance sector.

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First Published: Jan 01 2002 | 12:00 AM IST

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