“In the wake of the large claim from Sikkim Urja, the industry has decided to raise rates by as much as 25%, mostly to get reinsurance support,” an insurance industry source told ET. “If insurers do not raise rates, it will be difficult to get reinsurance support.”
Insurance executives, speaking on the condition of anonymity, said the new rates are necessary to manage increased risks, especially since reinsurers are unwilling to extend cover to such public assets without additional money.
However, critics argue there is scope for cartelisation, given the seemingly coordinated increase in premium rates after the flooding incident.
Starting December 15, the cost of insuring public infrastructure assets will go up.
For instance, if the earlier rate for a non-industrial factory was 0.18 per thousand sum assured, it will now be 0.22. And for roads and bridges, the rate will climb to 0.52 from 0.43.
Some reinsurance companies have said they will not support treaties with insurance companies if they do not adhere to these elevated rates.