The Hindu Business Line : General insurers pitching to provide risk cover to port trusts

GENERAL insurance companies have begun pitching for providing risk cover to port trusts in the country after the devastating impact of the tsunami that hit the East coast on December 26 last year.

Among the insurance companies in the lead for providing risk cover to the port trusts is the public sector United India Insurance Company Ltd. Port trusts have high-value assets such as giant cranes, and bulk and liquid cargo handling terminals. Few of these high-value assets of port trusts are currently insured. This is because they are treated as sovereign assets. This is unlike the case of public sector companies, where the assets are fully insured.

Only some of the private sector port assets on the West coast are insured at present, the sources said. In fact even after 9/11 terrorist strikes, few port trusts took insurance cover against terrorism risks.

The sources said that so far one of the major factors that prevented insurance cover of the assets was that port trusts have rarely raised commercial finance for meeting their requirements nor have they mortgaged any of their assets.

But port trusts were expected to begin foraying into the financial markets for meeting their funding requirements. Consequently, wherever assets were mortgaged to the financiers, they would insist on insurance cover for the same.

Moreover, industry sources said that the Government also wanted port trusts to begin insuring the assets against natural calamities. This was because insuring the assets would ensure that their losses would be covered in the event of such calamities. In the last tsunami, port trust assets suffered little damage and only some of the cargo and vessels were damaged, which were insured by the owners.

The only ports that suffered large-scale damage were the minor ports, especially Nagapattinam, in Tamil Nadu, where, again, few of the assets were insured. This increased the magnitude of the losses.

The sources said that for the general insurance companies, such an asset base would also help augment their premium income, especially fire cover, where the claim ratios were low. This would help them bring their overall claims ratio to well below 100 per cent.

Besides, the sources said, the public sector insurance companies were keen to pre-empt private sector competition in securing this high-value business. Insurers said that the nine port trusts would generate substantial business volumes for all of them.

The sources said that all the four public sector insurers currently had substantial capacity to provide risk cover to the port trusts on highly competitive terms with reinsurance support from the General Insurance Corporation of India or within the insurance pool. This pool allowed for PSU insurers to share the risks among themselves.

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