Govt launches $1.5-billion Bharat Maritime Insurance Pool to shield Indian ships in war-risk zones

The government on Tuesday launched the Bharat Maritime Insurance Pool to provide risk cover to Indian vessels on international sea routes, including war and high-risk zones.

The Bharat Maritime Insurance Pool of $1.5 billion, with a sovereign guarantee of $1.4 billion (₹12,980 crore), would facilitate continuous maritime insurance coverages, in the backdrop of current West Asia tensions, the Finance Ministry said.

Handing over insurance policies to three companies, Department of Financial Services Secretary M Nagaraju said global uncertainties have impacted trade flows, and due to the West Asia situation, insurance premiums have increased compared to pre-war levels.

"This is going to have a positive impact on trade flows currently and will have long-term benefits to the country. India is the only major country without the P&I (Protection and Indemnity) club. With this BMI Pool, we have also created a roadmap to form and strengthen the P&I club," Nagaraju told reporters.

Nagaraju also stressed the need for reinsurance, besides P&I, for the maritime sector, and asked insurance companies to work with the Shipping Ministry to take forward the idea.

In insurance parlance, a P&I club is a mutual insurance association that provides risk pooling, information and representation for its members.

Nagaraju handed over the first Marine hull and machinery war policy document to Hoger Offshore and Marine Pvt Ltd, issued by the New India Assurance Co Ltd under BMIP, providing financial protection against war perils while navigating through high-risk war zones.

Also, a Marine Cargo War Policy was presented to Vedanta Sterlite Copper Ltd, covering its import of cable wires. The policy was also issued to Balrampur Chini Mills Limited.

A governing body has been constituted to oversee the functioning of the pool, including approvals regarding the invocation of the sovereign guarantee. In addition, an Underwriting Committee (UC) responsible for ensuring prudent, consistent and technically sound underwriting of risks ceded to the pool has been formed, the ministry said.

In April, the Union Cabinet approved the creation of a domestic insurance pool, namely 'Bharat Maritime Insurance Pool' (BMI pool) with a sovereign guarantee of ₹12,980 crore to facilitate continuous maritime insurance coverages. GIC Re will act as the pool administrator.

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.

The purpose of the pool, apart from providing reasonable rates, is to maintain coverage in times of supply disruption. The rates will be competitive, and they will be better than market rates and help the shipping companies.

Insurance policies will be issued by domestic insurers that are pool members, using the combined underwriting capacity of the pool. These risks would then be reinsured by all pool members, in proportion to their capacity commitment to it.

For claims arising up to $100 million, the pool will service the claim using its own capacity, and for claims beyond $100 million, the sovereign guarantee will be invoked to service claims as a contingent backstop of last resort, after complete exhaustion of the pool's accumulated reserves, member contributions and reinsurance arrangements.

The pool will enable the country to strengthen sovereign control over maritime trade and ensure continuity of trade even in the event of withdrawal of reinsurance coverage due to sanctions or geopolitical tensions. This would enhance India's maritime risk protection framework and support secure global trade operations in future, promoting India's financial sovereignty.

(Except for the headline, Fortune India has not edited the content of this PTI report.)