Now in 2012 as the Indian Market Terrorism Risk Insurance Pool celebrates successful completion of its first decade, P & I Clubs and Reinsurers withdrew cover for H&M and Protection & Indemnity cover to Indian ship owners carrying Iranian crude in the wake of US sanctions on Iran. Once again the Indian insurance industry bridged the gap and has provided the necessary P&I cover. (story on page 16).
Of course, the formation of Terrorism Risk Insurance Pool in 2002 wasn’t a new concept but to put everything into place and quickly was the need of the hour. Something had to be done to keep the cover alive and stop things from being derailed. It would have hurt the Indian economy too.
The dozen odd Indian general insurers led by GIC Re and guided by IRDA, the Indian insurance regulator, at that point of time were in agreement that in the given situation where it is virtually impossible to quantify the risk of terrorism, both in terms of severity and the frequency of exposure, a ‘terrorism insurance pool’ was the best remedy. To begin with in 2002, the pool provided a terrorism cover of Rs.1000 million (US $ 20 million), not a big amount by the standards of the international market but yes we had a terrorism cover of our own. Things were soon in place and we could rest in peace. But the going was not so smooth for many of the smaller countries in the region. GIC Re, however, took the lead and provided the required help to them. Very soon it was back to normal for all of us. Today in 2012 as the Pool completes its first successful decade, the policy of close cooperation, self-reliance and the spirit of rising to the occasion has seen the Pool grow to provide a capacity of Rs. 1000 crores. (Rs 10,000 million).
Chairman-cum-Managing Director Mr. Ashok K Roy inaugurated the Workshop. In his address Mr. Roy said that the 26/11 Mumbai terrorist attack was a testing time for the Pool and settlement of all the claims arising out of this incident by the Pool is testimony to the claim paying ability of the Pool. Mr. Roy, however mentioned that it is disheartening to note that many risk are being reinsured facultatively in the overseas market instead of utilizing the Pool capacity, merely to quote competitive terms to the clients. He pointed out that international reinsurers do not hesitate to withdraw cover mid-term, and it is only the Pool that can ensure continuity of cover in the long run. Mr. Roy said that the Pool must find a solution to halt this situation and ensure that all terrorism risks are ceded only to the Pool, so that the Pool’s premium base is further strengthened.
Mr M Ramaprasad, Member (Non-Life), IRDA, delivered the key note address. He recalled the contribution of some of the stalwarts like Mr Rangachary, the then IRDA Chairman and Mr C N S Sastri for their in formation of the Terrorism Insurance Pool. He compared the Indian Terrorism Pool with other terrorism insurance pools globally, like GAREAT of France and Pool Re of UK, and highlighted that unlike the foreign Pools where there is participation of Government and Public Private Partnerships in providing capacity, the Indian Terrorism Insurance Pool is working purely on the capacity provided by the insurers only. Mr. Ramaprasad said that the Pool has provided an ideal solution to the market to ensure price stability and continuity of cover for terrorism risk. He also expressed the view that it was too premature to consider disbursal of the Pool’s surplus reserves, and instead, the market can explore the utilization of the funds for starting other pools.
Mr David Guest, Senior Underwriter from Hiscox London made a presentation on “Underwriting Considerations for Terrorism Risk Insurance-An International Perspective". His presentation, inter alia, included development of Hiscox’s terrorism re/insurance portfolio, their geographical distribution, occupancy-wise bifurcation, types of coverages available, the importance of accumulation control, pricing considerations and trends in different countries, etc. The presentation was well received by the participants and there was an interactive question-answer session after the presentation. Mr Arvind Kumar, Joint Secretary, Ministry of Finance, in his valedictory address praised the exemplary manner in which the Pool settled the losses arising out of the 26/11 Mumbai terrorist event, and noted that the restoration of the affected hotels would not have been possible but for the settlement of the claims by the Pool. He said that the Pool offers great opportunity to the Indian clients in terms of coverage against terrorism risk. He also lauded IRDA for being a part of the process of developing the insurance market in the country.
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