HPCL-Mittal pays Rs 60 crore to insure its under-construction refinery

HPCL-Mittal Energy Limited (HMEL) has paid Rs 60 crore to insure its planned refinery in Bathinda in Punjab against risks during the construction phase.

HMEL is a joint venture between Hindustan Petroleum Corporation Limited (HPCL) and Mittal Energy Investment, Singapore, an LN Mittal Group company

“Building a 1,000-km pipeline from Mundra to Bathinda and constructing a crude oil terminal involves major risks,” said a senior executive of a private insurance company.

While New India Assurance is the lead insurer with 75 per cent stake, Oriental Insurance has a stake of 25 per cent. The company is yet to finalise the percentage of reinsurance support it will seek from the national reinsurer, General Insurance Corporation of India (GIC). But sources say the chunk will go to GIC.

Generally, insurance companies do not carry large risks from projects, especially refineries and power plants. They pass over 90 per cent of the risk to reinsurance companies, either GIC or to international re-insurers.

Industry sources said there had not been any large claim from companies during their construction period in the past.

The total insurance package is around Rs 18,000 crore. According to insurance brokers, the property cover will insure the plant against fire and other perils and loss of profit in case of delay in the commencement of the business.

Covering oil risks has resulted in losses for insurers in the past. However, last year, insurance companies did not see any large claim from this sector.

The size of the insurance market for fire and engineering has shrunk 2 per cent to Rs 3,420 crore in terms of premium in 2008-09 as against a year ago.