Industry sources have said risk perception of Indian market has remained at an elevated level as the government has pronounced any act of terror from Pakistan soil will be considered as an act of war which will impact how terror covers and claims are dealt with in India by re/insurers in future
Mumbai/ New Delhi: Re/insurers, who were almost ready to serve notice of cancellation(NoC) to Indian airlines, have decided to pause for now and are keeping a closer watch over the situation as ceasefire has been declared on Saturday by India and Pakistan after four days of Operation Sindoor, which started as India’s military operation in response to the Pahalgam terror attack but was rapidly escalating into a full scale war.
Re/insurers are keeping a watch over the situation closely as the risk perception of the Indian market has risen.
Industry sources said risk perception of Indian market has remained at an elevated level as the government has pronounced any act of terror from Pakistan soil will be considered as act of war which will impact how terror claims are dealt with by re/insurers in future.
“The issue is that any insurance claims out of war is not payable as it falls under force majeure but claims related to terror are admissible in India. India has a terror pool ,which is managed by GIC Re. If terrors acts have been be categorised as acts of war by the Indian government then claims can’t be paid. So business may not be as usual in this segment in the future,’’ said sources in the industry.
Besides Operation Sindoor is ongoing and represents a shift in India’s strategic posture, according to sources.
Sources confirmed that the operation is not over and signals a new normal in India’s approach to counter-terrorism and re/insurers have to factor it in their India risk assessment.
Foreign Secretary Vikram Misri, in a press briefing late on Saturday evening, said that there had been repeated violations of the military understanding reached earlier in the evening between the Directors General of Military Operations (DGMOs) of India and Pakistan.
“For the last few hours, there have been repeated violations of the understanding reached earlier this evening between the Directors General of Military Operations of India and Pakistan. This is a breach of the understanding arrived at earlier today. The armed forces are giving an adequate and appropriate response to these violations and we take very very serious note of these violations,” said Misri.
“The letter for NoC was ready and if tension between the two countries involving attack each other’s military installations, would have continued for another few hours, we would have sent them asking the customers like Air India, Indi Go and Akash either to cancel the existing policies or pay higher premium to continue the cover,” said London market sources.
Global reinsurers like AIG and GIC Re which have provided reinsurance covers to multiple large airlines and few insurers like ICICI Lombard General Insurance and New India Assurance, which have insured a few corporate jets, had remained high alert after the launch of Operations Sindoor.