Large corporates are expected to run for insurance cover against terror attacks to overseas reinsurance companies with the impending hike in premium rates for terrorism cover from April 1.
Cover for terrorism in the country is provided by a common pool collected by all the non-life insurers which is used to honour claims. It is managed by state-owned General Insurance Corp GIC had issued a circular on February 11 to all non-life insurance companies hiking the premium rates between 36 to 53 per cent.
Corporates with large assets are finding the rates expensive have asked domestic insurance companies and brokers to take help from foreign reinsurers to get them secure cheaper covers from overseas. Reinsurers design the policies and quote relevant premiums.
Dinyar Jivaasha, senior vice-president for Insurance Management, Essar Group, said, “We have negotiated over 50 per cent lesser premium outgo by buying the terrorism cover from foreign reinsurers. Moreover, the foreign reinsurers have given us much higher limits than currently available under the terrorism pool and have also given us much lower deductibles.”
The pool does not entertain claims of more than Rs. 750 crore. Therefore, insurance companies have to take reinsurance support from overseas in case the sum insured is more than that.
The pool also does not offer a single cover for multiple locations and has high deductibles of 0.5 per cent of the total sum insured subject to a minimum of Rs 1 lakh and a maximum of Rs 10 crore.
In the wake of the Mumbai terrorist blasts that occurred in November, claims worth over Rs 500 crore may be paid from the terrorism pool.