• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• The Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

C. Shivkumar
Vishwanath Kulkarni

Bangalore , Dec.29

DESPITE repeated warnings on terrorist strikes from central intelligence agencies, several domestic information technology companies have not opted for terrorism risk cover.

Sources said only the multinational companies and a handful of domestic companies have taken comprehensive cover that included terrorism risk. The domestic companies that have taken the cover include Infosys Technologies Ltd, Wipro Ltd, Aztec and iGATE among others.

Most companies said they had taken the cover as part of their general insurance cover. However, insurers said unless terrorism is specifically covered, claims would not be admissible. Insurers have indicated that claims on account of losses due to fire caused by acts of terrorism would not be admissible. "Claims on such incidents can be accommodated only if they take terror cover." As a result, losses on account of terror strikes would have to be absorbed by the companies themselves, the sources said.

The preference for only standard cover wasalso due to the fact that cities and IT establishments had never faced attacks from terrorists in the past. This was despite the repeated alerts by the security establishments that IT companies were on the radar of terrorist organisations.

According to sources, one of the major reasons for IT companies' reluctance to take specific terror risk cover was the desire to restrict the cost of premium outflows and ensure higher bottomlines. The pressure to trim costs was especially on those companies planning initial public offerings.

At present, cost of standard fire cover is Rs 1.13 per Rs 1,000 of sum assured. This cover includes additional hazards such as fire, floods and earthquake. The only additional liability cover that the firms have taken in addition to these risks is loss of profits for losses.

For terror risks, the premium rises by another 40 per cent. Consequently, if the sum assured was for Rs 100 crore, the premium costs alone would be slightly over Rs 2 crore. Consequently, saving on this cover would translate into better earnings per share for those entities planning IPOs or dividends to stockholders, the sources said.

The sources said Wednesday's attack on the Indian Institute of Science would now likely prompt more companies to take terror cover.

Despite the additional premium inflows expected, not many insurers are comfortable with the situation. One of the major reasons for this is the possibility of their own losses rising, due to the claims. More so, at a time when they are already saddled with large claims from losses due to natural calamities in the last few months.

More Stories on : Terrorism | Insurance | General Insurance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Fog means all-clear to rabi farmers even as pilots fret

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line