ONGC begins hunt for reinsurers

Oil and Natural Gas Corporation (ONGC) has started hunting for reinsurance companies to renew its annual insurance cover from April 1. But the energy giant is seeking to extend its risk cover at a time when threat perceptions in the Indian subcontinent have increased following the terrorist attacks in Mumbai and Lahore.

Additionally, rates in the global reinsurance market have started hardening after global majors, such as AIG and Swiss Re, faced tough times due to the economic slowdown.

In fact, rating agencies had downgraded most of these reinsurers’ ratings. According to sources close to the development, quotes received so far by ONGC already point to a stiff hardening of rates.

The company is likely to keep the overall size of the cover unchanged as claims have not been significant.

For the current financial year, ONGC’s insurance policy has a combined single limit of $750 million for any one accident, including $20 million in deductibles.

According to industry sources, ONGC’s cover, along with Air India’s, is amongst the largest covers in the country.

The public sector company’s insurance programme will be managed by United India Insurance as the lead insurer. United India will underwrite 55 per cent of the risk while Oriental Insurance, New India Assurance and National Insurance will have 15 per cent each, a chairman of a public sector insurance company revealed.

Sources in the insurance industry said that ONGC, along with United India and brokers, would market the risk in the London reinsurance market towards the end of the month. But they still remember how in 2002, during a turbulent phase, ONGC had failed to get a placement for 41 days.

“The going may not be easy this time too,” they pointed out.