Insurers, brokers slip terror covers abroad | Latest News India - Hindustan Times
close_game
close_game

Insurers, brokers slip terror covers abroad

Hindustan Times | ByFalaknaaz Syed, New Delhi
Apr 07, 2010 10:15 PM IST

The lure of cheaper reinsurance covers and handsome commissions from foreign reinsurers has led domestic non-life insurance companies to reinsure corporate terrorism covers abroad.

The lure of cheaper reinsurance covers and handsome commissions from foreign reinsurers has led domestic non-life insurance companies to reinsure corporate terrorism covers abroad. This is in violation of rules that require them to reinsure terrorism covers in the Indian Market terrorism pool.

HT Image
HT Image

A reinsurance company provides insurance to an insurance company. The Indian non-life insurance companies had together set up a terrorism pool after the attack on the World Trade Center in New York on September 11, 2001. As a result of this, foreign reinsurance companies had refused to provide reinsurance to Indian insurers. With the support of the pool, non-life insurance companies can provide a terrorism cover up to Rs 750 crore to a corporate while bigger terrorism covers can be got reinsured from foreign reinsurers.

Hindustan Times - your fastest source for breaking news! Read now.

The funds from the pool are then used to pay back the claims arising out of terrorist attacks, such as the November 26, 2008 attacks on Taj and Trident hotels in Mumbai, which resulted in claims worth roughly Rs 500 crore.

The pool’s manager, General Insurance Corporation (GIC), sent out a warning to all insurers last month saying that this unhealthy practice is depriving the pool of premium and it is looking at imposing a monetary penalty for such violations.

On why insurers violate the rules, a senior GIC official said, “The pool does not pay anything to an insurer or broker for bringing business. However, foreign reinsurers pay commissions ranging from 5 to 15 per cent of the premium to an insurer. The insurance company then pays a good commission to the broker. So, both are complicit in reinsuring terrorism covers abroad.”

The Indian Market terrorism pool earns a reinsurance premium of Rs 300 crore annually. Even the premium rates of the terrorism pool are higher than those offered by foreign reinsurers.

Unveiling Elections 2024: The Big Picture', a fresh segment in HT's talk show 'The Interview with Kumkum Chadha', where leaders across the political spectrum discuss the upcoming general elections. Watch now!

Get Current Updates on India News, Election 2024, Arvind Kejriwal News Live, Bihar Board 10th Result 2024 Live along with Latest News and Top Headlines from India and around the world.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Thursday, March 28, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On