Terror cover rates unlikely to go up, say insurers

Insurance industry does not see the possibility of any hike in premium for terror cover in the aftermath of serial blasts in Mumbai that has claimed 18 lives and left 150 injured.

"We don't forsee any hike in premium rates as there has not been much damage to properties," General Insurance Corporation Chairman and Managing Director Yogesh Lohiya told PTI.

According to Bharti AXA General Insurance Vice President (Property & Engineering) Balaji Cuddapah said, "We do not see much of an impact on the terror premium rates, which is governed by the domestic terror pool."

For property related risks, insurers created a Terrorism Pool following the September 2001 terrorist attack in New York. The domestic Terrorim Pool had grown steadily with contribution from the insurers in India over the years and today its corpus stands at Rs 1,700 crore.

Premiums are likely to remain stable as far as fire policy, which includes terror cover, is concerned because the damage to properties is not very high, a senior official of the private general insurance company said.

Cuddapah added that the blasts happened in commercial areas where the exposure of Bharti AXA General Insurance was insignificant.

The last time the premium rates were revised by the terror pool was in 2009, and industry sources said there has not been many claims to the pool.

According to the norms of the Pool, the aggregate loss payable per location by any one or all insurers has been limited at Rs 750 crore.

According to ICICI Lombard Head Risk and Re-Insurance Rajive Kumaraswami, "whether the rates would harden is difficult to state at this stage and it is a decision which the Underwriting committee of the pool would need to take, which would need IRDA approval."

The utility of Terrorism Pool was proven in November 2008 when two hotels in Mumbai among other targets suffered from a a terrorist attack. The Pool paid a loss of around Rs 400 crore to the affected parties.