Insurance Premia Likely To Shoot Up

India Inc had better brace itself for increased outgo on general insurance covers with war clouds looming large over Asia making an imminent hike in premium by insurers a distinct possibility.

Corporates in sectors like petroleum, refinery, aviation and marine hull will most probably have to earmark higher amounts for insurance.

While premium for risk cover against terrorism, which is covered under catastrophe, is expected to be revised next year, war and SRCC (strike, riot, civil commotion) premium could go up even before September-end.

While premium on insurance against terrorism, which is in-built in certain policies like fire and transit, are expected to go up from the present 0.003 per cent of sum assured, credit insurance rates could increase by as much as 15-20 per cent.

A committee of underwriters, which determines the rates, is slated to meet in London next week to decide on the premium, an executive with a general insurance company said.

Reinsurance brokers also said that Osama bin Laden-sponsored attacks are expected to raise the premium for hijack, kidnappings and ransom insurance.

"Exporters, underwriters and reinsurers are unsure about the effect that the suicide attacks in the US would have on the exports from various countries but any change in export policy due to political reasons or developments like this is bound to push up premia," said a reinsurance broker.

Also, the fact that shipments between India and the US or Europe have to move through the sensitive part of Asia increases the risk profile which in turn would push up the premium, added an executive with a general insurer.

War rates for marine hull have already been hiked by $ 125 for 25 cfu (cubic feet unit) containers and $ 150 for 40 cfu ones. Similarly, increases would also be effected in case of aviation war rates from October 1.

Insurers and reinsurers also predict an increase in oil and energy insurance premia which in any case were hiked following the sinking of an oil rig in Brazil last year as it resulted in one of the highest ever claims in insurance history.

With west Asia expected to be under strain in the event of a war breaking out, the premia are expected to increase further. Typically, oil and energy insurance covers exploration, refining, refineries, off-shore rigs and pipeline and distribution.

Indian companies are, however, not expected to feel the heat immediately as most large outfits like Oil and Natural Gas Corporation and Indian Oil Corporation have their annual covers renewed at the beginning of the fiscal.

Though liability insurance premium is also expected to increase, the effect would be felt more in case of third party liability as Indian insurers have a good track record at personal and public liability, said a general insurance executive.