Firms Look Overseas for Terror Cover
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18 April 2008
Indian corporate houses are shopping for cheaper terror insurance covers abroad. This is essentially because of the limits on domestic terror covers and the fact that international policies are significantly cheaper.
“While limited capacity is one of the reasons, international cover is sometimes cheaper by almost 40–50% compared to terrorism pool rates,” said Alok Agarwal, director, corporate, ICICI Lombard. “But we always want companies to go with the Indian insurer.” The limit of liability per incident per location is Rs 750 crore, which sometimes may be sometimes an insufficient cover.
In the last six months, almost half the local companies have expressed interest in buying terror cover from international markets. There has been a definite increase in enquiries by Indian corporates for terror covers following the Mumbai attacks.
Meanwhile, the general insurance industry is toying with the idea of asking the government to make terrorism covers compulsory to companies.
G Srinivasan, chairman and managing director, United India Insurance Co, admitted to surge in demand for terror covers. “The international character of terrorism and the unimaginable loss potential has seen companies scouting for terrorism cover, and sometimes this cover is inadequate. Hence, they seek international re–insurance–driven terrorism covers through us.” No company is allowed to buy directly from the international market.
He added that, since the capacity for terrorism cover is limited, some sort of a public–private partnership with government intervention could be explored. “I feel the government could make terrorism insurance compulsory and there should be automatic inclusion of terrorism insurance in property policies with an additional premium,” he said.
Recently, corporate houses without a terrorism cover have been allowed to take a policy as a mid–term inclusion. Many companies, it is learnt, are already enquiring about such covers. In fact, terror insurance rates have gone up by almost 36% from April 1, 2009.
AR Sekar, director, general manager, The New India Assurance, agreed that there are some instances of companies keen to buy from international markets. “But, re–insurance rates are also hardening.”