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India is safer than you think. When newspapers and TV channels run stories of terrorist outrages, you may get the impression you are living in a dangerous country. But experts charged with the business of insuring you against such acts of terror may have just given a thumbs-up about the safety of the country.
Insurance against terror may soon come at cheaper rates than before. Premiums paid for such insurance are set to dip because the corpus (pool) created for this purpose has swelled and received less claims.
All claims arising from any terrorist activity are furnished through the terror insurance pool formed by general insurance companies in 2002. The pool is managed by the General Insurance Corporation of India.
A source close to the development said that there is discussion to revisit the pool rates by the underwriting committee as the premium rates are higher than international standards.
The pool currently has a corpus of over Rs 2,000 crore, even after accounting for losses after 26/11 attack of Rs 400 crore.
“The premium rates should come down by 30-40 per cent as the terror pool has built a corpus,” said an official from a general insurance company.
Rating structure
The pool adopts a differential premium rating structure for three broad categories of risk, such as industrial, non-industrial and residential risks. For residential the terror insurance premium is 10 paise per Rs 1,000, for non-industrial it is 20 paise, and industrial, 30 paise.
“The terrorism insurance rates went up after 26/11 and if increased further they will be very high compared to international rates.
“Also, after payout for 26/11, the pool may have enough funds to lower terror premium rates,” said Mr K.G. Krishnamoorthy Rao, Managing Director and CEO, Future Generali Insurance.
“Terrorism rates by foreign re-insurers are softer than domestic rates as there has been no major terrorist activity of late,” added Mr. Krishnamoorthy.
“International market rates for terror insurance premiums by re-insurers are cheaper by 20-50 per cent, so many Indian companies take terror cover from them,” said Mr Amin R. Mazagonwalla, General Manager, India Insure, an insurance broker.
Raise Liability Limit
In India, insurance companies provide terrorism coverage only up to Rs 750 crore at any one location from the Market Terrorism Pool as per Terrorism Pool rules and terms.
“There are talks to increase limit to around Rs 1,000 crore depending on what the companies will be able to pool in. It may be done in April next year subject to approval from the regulator,” added the source.
At present, 75 per cent of the pool is constituted by the four public sector insurance companies — New India Assurance Company, Oriental Insurance Company, United India Insurance Company and National Insurance Company — and re-insurer GIC. The private players constitute 25 per cent of the pool
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