Tac Penning New Mega-Risk Tariff

The Tariff Advisory Commi- ttee (TAC) for insurance is chalking out a plan for large Indian corporates - mega risk tariff. This first of its kind plan will help Indian corporates, which have so far been relying on the overseas market, to insure their mega projects within the country.

TAC, which sets tariffs in certain segments of the insurance market, also proposes to redefine mega risk by bringing down the sum assured from Rs 10,000 crore to Rs 1,000 crore per risk per location. This will increase the number of corporate risks that could qualify for the mega risk tariff plan.

 

At present, only about 10 projects qualify for the mega risk cover. This makes the possibility of India retaining these large risks in the home market unviable. Under the proposed redefinition, as many as 150-200 projects would qualify for the proposed tariff plan, said TAC officials.

This will make the new tariff plan viable as the more the number of covered projects, the higher will be the spread. The new plan will help reduce the flight of premium to the overseas market. More importantly, it will cushion the erratic hike in premium costs faced by Indian corporates insuring their projects overseas since September 11.

The TAC is also in talks with global reinsurance firms for the framing of the new cover. The mega plan will look at including various features available in the international market like design defective risk cover, all at an additional premium. Additionally, companies under the petrochemicals tariff, which do not thus qualify to take an industrial all-risk cover, will be eligible to take cover under the new mega risk tariff plan.