The Hindu Business Line : Mumbai attacks bring to fore inadequacies in terrorism cover

Chennai, Nov. 30 Terrorist attacks on the Trident Oberoi and Taj hotels and the Nariman House in Mumbai have brought to the fore the limitations of the existing terrorism pool in that it does not insure public liability and personal accident. The terrorism pool, which has a corpus of about Rs 1,000 crore, at present insures only damage to property.

The Mumbai attack is on private property and the loss arising from public liability (liability of the hotel towards the guests and visitors in it) and personal accident may be larger as the damage to properties of Trident Oberoi and Taj hotels will be paid by insurers from the terrorism pool.

But if the hotels had taken a cover against public liability and personal accident, the burden will devolve on the insurance companies, who will receive no help from the terrorism pool.

Mr S.S. Gopala Rathnam, Managing Director, Cholamandalam MS General Insurance, told Business Line that the issue of insuring public liability and personal accident was raised during the last terrorism pool meeting. Most insurers felt that having a surplus (Rs 1,000 crore) and not providing sufficient coverage did not make sense, he said.

The terrorism pool was set up in the aftermath of 9/11 incident in the US as many insurance and re-insurance companies suffered major losses and avoided providing cover. Therefore, the terrorism cover, as a peril was excluded from direct insurance coverage. Each country developed its own terrorism pool — where the premiums for covering terrorism risks will be transferred to a major corpus. In India, the pool is managed by the General Insurance Company.

Most private corporates and large companies have been taking terrorism cover, said Mr Swaraj Krishnan, Managing Director, Bajaj Allianz General Insurance.

Mr Rathnam said that the awareness among corporates to take insurance against terrorism has been high — the corpus of Rs 1,000 crore shows the awareness levels. Over the last few years with not much of claims, the premium was reduced to 30 paise for every Rs 1,000 of insurance.

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