New Delhi, April 11: With the war in Iraq nearing an end, the combat-weary insurance industry is hoping to see signs of revival within a fortnight.
“Marine hull and aviation insurance experienced bad days because of the US-Iraq war,” said P. Ramanujam, managing director of General Insurance Corporation. He, however, added that the Gulf region does not form a major part of the portfolio and this meant Indian insurers were somewhat insulated from the downturn.
“Things will come back to normal in another 10-15 days’ time,” Ramanujam told The Telegraph.
During the Iraq war, the insurance companies had advised bulk carriers going to Europe to avoid the Suez Canal and take the longer route via the Cape of Good Hope which saw higher freight costs for Asian shippers. Those who chose to go through the Gulf had to pay far higher marine hull and cargo insurance rates.
According to insurers, the war-risk surcharge rose from 0.05 per cent to 0.25 per cent on the cargo value or the cost, insurance and freight. In addition, shipping lines operating in the Indian sub-continent / Gulf sector announced a war surcharge of $ 40-$ 90 per 20-foot equivalent container unit (TEU) for shipments to Gulf.
The shipping lines were forced to pass on the increase in war-risk premia charged by their underwriters to their customers. Freight rates hovered at lower levels, making it difficult for shipping lines to accommodate huge risk premia to be paid to underwriters.
As of now, the London war risk rating committee has not sent any formal instruction to insurers asking them to lower the premium surcharge. Yogesh Lohia, AGM (technical) of Oriental Insurance, said, “The position right now is status quo. We have not received any indication from London reinsurers on scaling down the premiums but it is evident that things will stabilise soon.”
Speaking about the aviation sector, K. G. Arora, head-aviation and marine of New India Assurance, said: “Initially, there was a war premium surcharge of 0.125 per cent of the aircraft value imposed. But this was withdrawn after 15 days. It is expected that the war premium on marine cargo will come down in the next 10 days.”
In the beginning, London-based insurance brokerages had slapped an additional insurance premium and war surcharge on flights to the Gulf at a premium of $ 50,000 per aircraft (hull risk) in addition to surcharge of $ 50 per passenger.
David Stephanian, head (marine) of National Insurance Corporation, said, “According to various reports, it seems that the war is nearing an end. The war risk surcharge of 0.05 per cent is the normal rate for any shipment going abroad. The London re-insurers permitted us a ‘held covered provision’ allowing individual insurance companies to charge their additional rate. These charges are expected to come down as the situation becomes more normal.”