Hardening of premium rates in the overseas re-insurance market has led to a 19.5 per cent rise in the premium for insuring over $25 billion worth of offshore assets of Oil and Natural Gas Corporation (ONGC).
The offshore insurance policy of ONGC that is coming up for renewal on May 11 is the largest in the country.
ONGC will pay a premium of $31.73 million to renew the cover for its offshore assets, including all offshore oil and gas platforms, rigs, pipelines and vessels, for 2009-10. The policy is an “all risk” policy including the terrorism cover.
Last year, ONGC paid $26 million premium for insuring its offshore assets valued at $21 billion. So, while the company’s assets have grown by 19 per cent, the insurance cover has risen by 22 per cent.
United India Insurance is the lead insurer for the ONGC, while the remaining three public sector insurance companies — New India Assurance, Oriental Insurance and National Insurance — are co-insurers. AON Global has been appointed as the reinsurance broker by ONGC.
Around 80 per cent of the risk will be covered by the foreign re-insurers, while the remaining 20 per cent will be retained by the four state-owned insurance firms along with General Insurance Corporation.
Among Indian insurance companies, 55 per cent of the risk will be taken up United India with the other three public sector insurance companies taking on 15 per cent of the risk, each.
“After a major claim due to a fire in Mumbai High in 2007, ONGC’s account has been claim free,” said a senior official of United India.
“However, as international rates have hardened, the premium has gone up.”
The collapse of AIG, one of the world’s leading insurers, has changed the foreign insurance market dramatically, a senior ONGC official said. While Hurricane Gustav brought huge losses to the industry and raised the risk taking ability of insurers, volatility in the financial markets has hit their investments.
“As a result, insurers are now focusing on generating income through their core insurance operations,” the official said.