Context:
India has approved a ₹129.8 billion ($1.4 billion) guarantee-backed Maritime Insurance Pool to provide insurance cover for shipping risks amid wars, sanctions, and geopolitical tensions. The move aims to ensure continuity of maritime trade and reduce dependence on foreign insurers/reinsurers.
- Marine/ Maritime Insurance provides financial protection against losses involving ships, cargo, ports, terminals, and sea transport.
- It covers risks such as collision, piracy, fire, sinking, cargo damage, war risks, and natural disasters.
- A Maritime Insurance Pool is a group arrangement where multiple insurers jointly share large or risky liabilities. It is useful when private global insurers withdraw from high-risk regions.
- India’s pool is backed by a government guarantee, improving confidence and claim-paying capacity. It will run for 10 years, extendable by 5 more years.
- This became necessary because global conflicts and sanctions have led many insurers/reinsurers to either withdraw cover or sharply raise premiums.
- Reinsurance means insurance for insurance companies. It helps insurers spread risk. India’s major reinsurer is GIC Re (General Insurance Corporation of India).
Importance for India:
- Nearly 95% of India’s trade by volume moves through sea routes.
- Critical imports like crude oil, LNG, fertilizers, coal depend on maritime transport.
- Insurance disruptions can increase freight cost and inflation.
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