'India has not faced a major terrorism loss since the Mumbai terrorist attacks in 2008.'
Companies taking cover against terrorism risk are likely to see premiums fall up to 15 per cent from April 1, as State-owned reinsurer General Insurance Corporation of India slashes rates for terrorism risk insurance pool.
After the withdrawal of reinsurance capacity for terrorism risk by international reinsurers post the September 11, 2001, terrorist attacks in the US, the Indian market formed a terrorism risk insurance pool on April 1, 2022.
It was administered by GIC Re and all non-life insurance companies in the country were part of it.
The pool provides insurance support for terrorism risk covered under the property insurance policies, including cover to dwellings and fixed assets in multiple locations.
GIC Re's communication to non-life insurance companies said, 'According to the pool agreement, it (revision in pool premium rates) was taken up with the regulator, who has now approved the rate revision.
'These rates shall be inclusive of the cost incurred towards brokerage/agency commission up to 5 per cent on the terrorism premium for business procured through brokers/agents as per the current practice.'
The maximum limit of indemnity for insurance of sabotage & risk terrorism is decided by the pool underwriting committee where the initial capacity was Rs 200 crore (Rs 2 billion) per location. This was gradually increased to Rs 2,000 crore (Rs 20 billion).
"There has been a reduction of around 10 per cent to 15 per cent on the existing terrorism rates. This will have an implication for customers buying policies where terrorism is included in the scope of cover," said Hari Radhakrishnan, regional director, First Policy Insurance Brokers.
"But some large corporates may not buy terrorism cover from the Indian pool but may buy from international reinsurance markets. This will not have any impact."
The premium rates for terrorism pool are fixed on the basis of claims experience and India has not faced a major terrorism loss since the Mumbai terrorist attacks in 2008, experts said.
Insurance industry players said the rates have remained the same since April 1, 2014.
According to Insurance Regulatory and Development Authority of India's (Irdai's) annual report for FY24, the pool's premium income was Rs 1,654.63 crore against Rs 1,809.01 crore in FY23.
The claims paid by the pool were Rs 3.12 crore as no major losses were reported.
"The terrorism pool fixes the rate based on the claims experience and other factors, such as reinsurance costs and expenses of the pool. In India, there has been no major terrorism loss since the Mumbai incident of 2008," Radhakrishnan added.
"The pool could have considered these factors and reduced the prices being charged to customers."
Feature Presentation: Ashish Narsale/Rediff.com
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