The Hindu Business Line : Reliance refinery insured for Rs 50,000 cr

Risk cover
Mega-risk package policy shared by four public sector insurance cos and two private cos
Property cover is worth Rs 28,000 cr, while the loss of profit cover is around Rs 22,000 cr

Mumbai , Oct. 25

The Jamnagar refinery of Reliance Industries Ltd, affected by a fire on Wednesday, is insured for around Rs 50,000 crore. The policy was, in fact, renewed for a higher premium of Rs 180 crore on October 1, 2006, against Rs 130 crore last year.

"This is a mega-risk package policy shared by four public sector insurance companies and two private companies. The bulk of the cover is reinsured abroad," said a senior official of a public sector insurance company.

While New India Assurance is the lead insurer of the plant with a stake of 60 per cent, other companies which have co-insured include Oriental Insurance company (15 per cent), ICICI Lombard (10 per cent), Bajaj Allianz General (5 per cent), United India Insurance (5 per cent) and National Insurance Company (5 per cent).

An official at New India Assurance confirmed the total insurance package at around Rs 50,000 crore. According to a co-insurer, the property cover, which insures the plant against fire and other perils, is worth Rs 28,000 crore, while the loss of profit (production loss due to interruptions) cover has a sum assured of around Rs 22,000 crore.

The business interruption cover provides for the reimbursement of lost income and necessary standing expenses. They have a deductible period of 15-30 days after which insurance kicks in; in other words, the company will not be reimbursed for the said period. In the case of Reliance, the deductible period has been fixed at 30 days.

High premium

The premium for insuring the Reliance Jamnagar plant has increased this year to Rs 180 crore from Rs 130 crore last year. "There was some refurbishment conducted in the plant. Since the size of the policy increased, the premium has also edged up," said a senior official of an insurance company.

For the insurance industry, covering oil risks has resulted in losses. Reliance Industries Ltd was reported to have claimed Rs 120 crore in 2001 when the Jamnagar plant was damaged by the Gujarat earthquake. Pipelines, equipment and civil works had been damaged and the plant remained shut for two weeks.

Last year, insurance companies paid around $355 million (around Rs 1,604 crore) as claim against the fire that damaged an ONGC rig.

The Jamnagar fire may not result in the hardening of reinsurance premium. For re-insurers the cause of the fire would be crucial — whether it was due to poor maintenance or an accident, said an analyst.

The size of the insurance market for onshore oil risks is estimated at around Rs 250 crore in terms of premium.

More Stories on : Petroleum | Accidents | General Insurance | Reliance Industries Ltd | Gujarat

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