Indian Govt responds to West Asia shipping insurance spike with funding pool
As the West Asia war has led to a near 1000 per cent hike in shipping insurance, union cabinet on Saturday approved the creation of a domestic insurance pool — ‘Bharat Maritime Insurance Pool’ (BMI pool) — with a sovereign guarantee of Rs.12,980 crores to facilitate continuous maritime insurance coverage.
According to information and broadcasting minister Ashwini Vaishnaw, the pool ensures that Indian trade continues to have access to affordable insurance for vessels carrying cargo from any international origin to Indian ports and vice-versa, even when transiting volatile maritime corridors.
Indian industry has faced the brunt of high insurance costs since the war began on February 28.
The pool would cover all maritime risks like Hull and Machinery, Cargo, P&I and War risk, a statement by the cabinet said.
The policies will be issued by insurers that are Pool members, using the combined underwriting capacity of the Pool, which would be around ₹950 crore.
“The Pool will help to manage liability insurance locally, tailored to Indian Shipping conditions and regulatory requirements, develop specialized Marine underwriting, claims management and legal expertise within India,” the cabinet said.
Further, a Governing Body Constituted for this pool would oversee the formation and functioning of the pool. The government wants to ensure greater sovereign control over its cargo which is being moved in primarily foreign flagged vessels.
With increased global volatility and geopolitical instability, maritime trade has been impacted with increased risk of losses for cargo and vessels resulting in increased insurance costs and uncertainty in continuous availability of insurance.
Further, there is high dependence of Indian vessels on International Group of Protection and Indemnity (IGP&I) Club for P&I insurance covering third-party liabilities like Oil pollution liability, Wreck removal, Cargo damage, Crew injury and repatriation, Collision liabilities and so on.
The government said that due to these factors, there was a need for a domestic maritime risk covering pool to maintain sovereignty and continuity of trade in face of withdrawal of coverage due to sanctions or due to geopolitical tensions.
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