The Hindu Business Line : Insurance cos bracing for large claims

Bangalore, Nov. 28 Insurance companies are bracing themselves for large claims from Tata-owned Indian Hotels Ltd and the Oberoi- owned East India Hotels Ltd following the terror attacks on Taj and Trident-Oberoi hotels in Mumbai.

Sources said that the liability covers for EIH Ltd are currently covered by the public sector United India Insurance Company Ltd. In the case of the Indian Hotels, the covers are provided by the Tata AIG insurance group co-insured with the ICICI Lombard General Insurance Ltd.

The claims would mostly come in the form of terrorism risk and third party liabilities. The EIH liability cover is estimated at around Rs 10 crore for the Indian operations and approximately about $50 million for the global operations. In the case of the Indian Hotels, the cover is expected to be slightly larger, the sources added.

But sources said that insurers had exclusions in the contracts. In the case of the normal fire insurance covers, the exclusions were actions by public authority. Consequently, the insurers said that the actions by the country’s armed forced and consequent damage due to such actions would be treated as exclusions. However, insurers were liable to meet the claims on damages incurred due to terrorist actions. In addition, the sources said that insurer liabilities would also extend for meeting revenue losses during the period of non-operation of the property. Such covers, the sources said, were normally covered under the fire/property covers.

However, the sources said, that much of the losses are done on a back-to-back basis. This implied that the primary insurers would have reinsured their risks. Consequently, the risks on the primary insurers’ balance sheets are minimal, although the claims are likely to be large. Besides, for insurance companies, liabilities are also capped. Any legal liabilities beyond the caps would have to be borne by the respective companies themselves, the sources added.

Yet, officials of United India said “It is still premature to assess the losses. Only after the company managements are permitted access to the properties, losses can be estimated.”

This, the sources said, could take a few weeks before the claims are actually lodged with the insurers.

More Stories on : General Insurance | Terrorism | Hotels

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