Despite increase of $3 billion in its offshore assets and increase in the cover, premium of Oil and Natural Gas Corporation’s (ONGC) offshore package insurance policy has risen marginally by 2% at $25.8 million for assets worth $36.7 billion.
Last year ONGC had paid premium of $25.25 million for covering assets worth $33.7 billion.
State-owned General Insurance Corporation of India (GIC) has emerged as the lead reinsurer and it will be holding 15% of the risk. United India has emerged as the lead insurer and it will be sharing 7% of the risk with remaining three co-insurers – New India Assurance, Oriental Insurance and National Insurance.
Policy for 2012-13 will be renewed on 11 May 2012 by United India Insurance that has remained the lead insurer for several years.
As per United India Insurance, international oil and energy insurance market is a specified market and has not seen any losses and therefore market capacity has increased. It further said, premium is based on the reinsurer’s quote and it is in line with international market condition and it is reasonable and it is confident of placing it in the market.
The second lowest (L2) and third lowest (L3) bids submitted by foreign reinsurers were $33 million and $50 million.
ONGC offshore insurance package policy is the country’s largest insurance policy covering all offshore assets including all offshore oil-and-gas platforms, pipelines, rigs and vessels. The policy covers risks such as sinking, air-strike, damages due to accidental perils, terrorism, all kinds of man-made disasters and natural calamities such as earthquake, thunder, and storm.
New policy will also allow ONGC to get higher claim amount of $150 million in case of blow out compared to $100 million as blow-out expenses in current policy. ONGC insurance policy has a loss limit cover of $750 million. The limit has remained same for many years; this means for every single property, reinsurers would not pay a claim of more than $750 million even though the property at risk would be high.
According to the insurers, considering the increase in assets of ONGC by $3 billion and additional $50 million in case of blow out, it seems as the reduction in premium.
And it still remains to be seen whether reinsurance market has softened or will react to losses suffered worldwide or not, and it will only be known if ONGC risk is successfully placed abroad.