Ibrd Pressures India To Open Up Insurance
The issue is expected to figure in talks between the visiting delegation led by World Bank president James D.Wolfensohn and government officials.
The World Bank and IFC have, of late, been insisting that their clients draft comprehensive insu-rance policies to cover various aspects of project risk.
Public sector insurance companies, which have not been offering coverage for certain aspect of risks are under severe pressure to rework the policies.
The National Thermal Power Corporation, which is the biggest borrower of World Bank assistance in India, has recently taken measures to strengthen its risk assessment capabilities.
It has sought senior officials on delegation from the four insurance PSUs and set out to look for new brokers to handle reinsurance abroad.
Earlier, the Asian Develop-ment Bank (ADB) had linked its capital markets development fund with the pre-condition that the insurance sector is restructured.
The government had managed to persuade ADB to advance the loan after citing the changes in the investment norms of General Insurance Corporation and certain other changes carried out in the internal functioning of GIC as evidence of its effort to restructure the sector.
Certain forms of risks like fuel supply and pricing risks, currency risks, political risks, credit and interest rate risks are not offered by Indian insurance companies.
Foreign financiers, including multilateral agencies, view them as crucial in shaping funding decisions.
Although the World Bank and IFC has not set a pre-condition, the two organisations have repeatedly emphasised the insurance industry liberalisation was a requisite to attract foreign funds into the infrastructure and other sectors.
Frank Wisner, the ambassador of the US recently emphasised the need to liberalise the sector in order to attract a new pool of new resources, much of it long-term money, for financing infrastructure development.
Wisners remarks are significant both because the US is the largest source of foreign funds and is the biggest donor to the World Bank over which it has considerable influence.
Insurance industry officials cite the examples of an aviation company and a power company which asked them to re-tailor their policies in order to meet the requirement of IFC, which is one of the funding agencies in their respective projects.
Although public sector insurance companies have of late begun to offer tailor-made engineering policies for new projects, they are restricted by their underwriting capabilities. They are increasingly using foreign brokerage firms under persuasion from clients who in turn are under pressure from foreign financiers.
The underwriting capabilities have to be enhanced for the Indian insurance industry to be able to take advantage of new business generated by liberalisation, said R S Gupta, former chairman of National Insurance Company.