Earlier, 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) and other general insurers, have stitched up a $100 million(around Rs 950 crore) Bharat Marine Pool(BMP), that would manage maritime risks like Hull and Machinery, Cargo, P&I and War risk.
New Delhi:In a bid to reduce dependence on overseas expensive re/insurance,the Union Cabinet chaired by the Prime Minister Narendra Modi today has approved the proposal for creation of a Rs 950 crore domestic insurance pool, Bharat Maritime Insurance Pool’ (BMI pool), along with a sovereign guarantee fund of Rs12,980 crore to facilitate continuous maritime insurance coverages even during war times.
Briefing about decisions taken at meeting of the Union Cabinet, Information and Broadcasting Minister Ashwini Vaishnaw said the pool ensures that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice-versa, even when transiting volatile maritime corridors.
“Any ship that goes into the ocean has insurance. Insurance is available for many types of activities. There’s basic insurance for damage. Another is for protection and indemnity… A sovereign guarantee fund of approximately Rs 12,980 crore will be created for maritime insurance. It will cover all types of maritime risks, including machinery, cargo, and war. It will be given to Indian-flagged vessels, Indian-controlled vessels, and those with either an origin or destination in India. This will be for a ten-year period, with a five-year extension,” he said.
Currently, there is high dependence of Indian vessels on International Group of Protection and Indemnity (IGP&I) Club for Protection & Indeminity( P&I)insurance covering third-party liabilities like oil pollution liability, wreck removal, cargo damage, crew injury and repatriation, collision liabilities and so on.
Accordingly, there was a need for a domestic maritime risk covering pool to maintain sovereignty and continuity of trade in face of withdrawal of coverage due to sanctions or due to geopolitical tensions.
In the above backdrop, the Government has approved formation of ‘Bharat Maritime Insurance Pool’ (BMI pool), formed by GIC Re and other general insurers with a corpus of Rs 950 crore for Indian flagged or controlled vessels or vessels destined to or starting from India, backed by a sovereign guarantee.
The pool would cover all maritime risks like Hull and Machinery, Cargo, P&I and War risk with reinsurance support from Sovereign Guarantee Fund of Rs12,980 crore .
The policies will be issued by insurers that are Pool members, using the combined underwriting capacity of the Pool, which would be around Rs.950 crore.
The Pool will help to manage liability insurance locally, tailored to Indian Shipping conditions and regulatory requirements, develop specialised Marine underwriting, claims management and legal expertise within India.
Further, a Governing Body constituted for this pool would oversee the formation and functioning of the pool.
Earlier, 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 all kinds of covers- Hull, Cargo and Protection & Indeminity(P&I), War Risk and has different sum assured for each of the segments which can be utilised on a floater basis for certain premiums.
Any capacity beyond $100 million, if required in terms of reinsurance, will be covered by the Sovereign Guarantee from the Indian government.
The pool is now almost formed and was waiting for government’s approvals for its functioning.
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.
GIC, which will manage the pool, is contributing around Rs 400 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.
The purpose of the new pool, with a substantial capacity, is to provide a permanent platform, which can manage a volatile marine insurance market 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.
The rationale for providing a sovereign guarantee to the proposed domestic insurance entity is rooted in the objectives of strengthening self-reliance, sanctions resilience and ensuring greater sovereign control.
The pool ensures that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice-versa, even when transiting volatile maritime corridors.
With increased global volatility and geopolitical instability, maritime trade has been impacted with increased risk of losses for cargo and vessels resulting in increased insurance costs and uncertainty in continuous availability of insurance.