Monday, December 11, 2023

insurance industry: Insurers hike premiums for public infra assets by up to 25% in aftermath of Sikkim cloudburst

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Mumbai: Indian insurers are raising premiums for industrial sites, railroads, roads, tunnels, bridges and other public infrastructure assets by up to a quarter in the aftermath of a deluge of claims due to October’s glacial lake outburst and unprecedented flooding in Sikkim and sub-Himalayan West Bengal.State-owned hydel unit Sikkim Urja lodged an insurance claim of ₹500 crore after unseasonal rains early in October caused the banks of the glacial South Lhonak Lake to breach, with a wall of water battering public infrastructure assets and drowning homes across a large swathe of urban Sikkim and the hilly reaches of West Bengal.

“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.

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