The BNP will provide three kind of covers- Hull, Cargo and Protection & Indeminity(P&I) and has different sum assured for each of the segments which can be utilised on a floater basis for certain premiums.
New Delhi:Looking beyond the ongoing West Asia crisis, which has severely paralysed global maritime trade and as a permanent measure,the Government and the Indian general insurers, led by state owned GIC Re, New India Assurance(NIA), have stitched up a $100 million(around Rs 940 crore) Bharat Marine Pool(BMP), that would manage the war risk for vessels.
The BNP will provide three kind of covers- Hull, Cargo and Protection & Indeminity(P&I) and has different sum assured for each of the segments which can be utilised on a floater basis for certain premiums.
The premium and rest of the modalities for the pool are being currently worked out, said sources at General Insurance Council, which is coordinating with different bodies to set up the BMP.
The purpose of the new pool, with a substantial capacity, is to provide a permanent platform, which can manage war related risk covers on a day to day basis with cheaper premiums and reduce dependence on overseas reinsurance capacity, which are either not available or available with unaffordable cost at the time of war-time emergencies.
Maritime insurance covers ships and cargo against risks such as accidents, piracy and conflict. War-risk cover typically excluded from standard policies and must be bought separately and the newly set up Bharat Marine Pool will exclusively cover war risks for Indian shipping industry.
GIC, which will manage the pool, is contributing Rs 500 crore of capacity and rest are coming from the general insurers who will be providing capacity calculated on the basis of 8 per cent of their Marine premium till Feb, 26.
However insurers like NIA, Tata AIG General Insurance, United India Insurance(UII),Oriental Insurance(OIC) are contributing larger capacity than others.
New India is providing almost Rs 100 crore while UII is contributing Rs 75 crore of capacity to the newly established pool.
Any capacity beyond $100 million, if required in terms of reinsurance, will be covered by a sovereign guarantee from the Indian government.
The pool is now almost formed and needs government’s approvals for its functioning.
Sources said the specialised pool, will operate like the Terrorism Pool, which manages premium collected for terrorism risks and also settles terrorism related claims.Similarly, all the war related premium, which is part of a comprehensive Marine cover, on a day to basis will be passed on to the BNP and any war related claims will be settled by the pool.
There is an effort to involve PSU oil companies in the Pool but, what will be their mode of participation, is not very clear currently.
There will not be any monetary contribution from GIC Re and other insurers to create entire corpus of $100 million, which will be generated out of the capacity provided by the participating members of the pool.
From the government side, both the Ministry of Shipping and the Department of Financial Services were involved in the discussions with the re/insurers.
The immediate reason for setting up a new Marine Pool is to insure vessels traveling in the Persian Gulf, amidst the Middle East war, that has been posing severe risks to the shipping industry and had pushed up the marine premium significantly.
Experts belived a 15-day ceasefire deal announced by by warring parties in the US-Israel Iran war will hardly make any difference to the risk scenario prevailing since West Asia conflict started,
Stephen Rudman, head of Marine, Asia, Aon, said from an insurance perspective a two‑week ceasefire is insufficient in materially changing risk pricing or an underwriting stance. Additional War Risk Premiums are driven by forward‑looking threat assessments rather than short‑term political developments.
While the announcement may help stabilise sentiment and reduce some near‑term volatility, underwriters are likely to treat this as a temporary pause rather than a resolution of geopolitical risk, commented Rudman.
“As such, we would expect continued scrutiny on Gulf transits, with elevated war risk pricing broadly remaining in place until there is clearer evidence of a sustained de‑escalation” added Rudman.
The Middle East conflict began on February 28 when the U.S. and Israel launched attacks on Iran. Tehran has since closed the Strait of Hormuz and struck sites in other countries in the region.
Global re/insurers, including GIC Re, had issued notice of cancellation(NoC) for marine hull and cargo war risk coverage leading to a surge in the re/insurance premiums.
In another move,the government has also asked the Gujarat based International Financial Services Authority (IFSCA)to revive its old plans to facilitate a Protection and Indemnity Club( P&I Club) for shipping industry as well as Captives in the GIFT IFSC, India’s sole international financial services centre,
Both P&I Club and Captives were not allowed in the country earlier..
The Department of Financial Services(DFS), recently had written to the IFSCA to go ahead with its earlier plans to develop P&I Club and Captives in its jurisdiction, GIFT-IFSC, after break out of the West Asian geopolitical crisis completely disrupting the Indian shipping industry and supply of oil,liquefied petroleum gas (LPG) and fertilisers to the country.
Currently, GIC Re manages a specialised “Marine Cargo Excluded Territories Pool,” established in 2022 to provide insurance coverage for shipments from high-risk zones like Ukraine, Russia, and Belarus. This pool allows Indian importers to secure insurance for essential goods, including fertilizers, following the withdrawal of global insurers due to war-related sanctions.
The facility primarily covers marine cargo war risks in the Black Sea and Sea of Azov, critical for fertilizer and oil shipments.