Mumbai Jun 22 :- After creating a Rs 500-crore ‘pool’ to provide insurance cover for shipments meant for importing fertilisers from Russia, Belarus and Ukraine by the general insurance industry in India, there are indications that the ‘pool’ is likely to be extended to cover shipments of cheaper Russian oil.
The ‘pool’, which was initiated at the instance of the Ministry of Finance, is already in place after receiving due approvals from the insurance regulator. The pool can only cover the cargo of the shipment and not the hull. Any claim within Rs 500 crore per shipment of fertiliser from these three countries can be paid directly from the new ‘pool’ without any reinsurance support.
India’s oil imports from Russia have gone up steeply as the latter is offering oil at a discount of 25-30 per cent. Russia has overtaken Saudi Arabia to become India’s second largest oil supplier after Iraq in May this year.
However, the extension of insurance cover to oil is likely to happen after Indian banks work out an arrangement with Russian lenders which are not impacted by Western sanctions and insurers tackle the reinsurance support, according to sources. The European Union had said its sixth sanctions package prohibits EU operators from insuring and financing seaborne transport of Russian oil to third countries after a wind-down period of six months. Although the Russian insurers provide coverage to oil shipment, the reinsurers, mostly from Europe and the US, are unlikely to provide coverage for the sellers due to the EU ban.
If the fertiliser pool is extended to oil, the size of the pool is likely to be expanded.
The insurance sector had earlier formed two pools, Terrorism Pool and Nuclear Pool. The ‘pool’ for fertilisers will also be administered by state-owned GIC Re and will be participated by all the general insurers without any support from reinsurance companies while providing cover to imports from Russia, Belarus and Ukraine.
The pool was created after hectic parleys among the Ministries of Fertilizers and Chemicals, Agriculture, Finance; the General Insurance Council, the official representative body of all domestic general insurers; and reinsurers on providing insurance cover to the cheaper fertiliser shipment from these three countries. Any delay in taking a decision would have adversely affected the nation’s food security in a couple of months.
After Russia had invaded Ukraine and sanctions were imposed by the US and Europe, Indian general insurers and reinsurer GIC Re had cancelled all marine covers which were issued for the import and export business from Russia, Belarus and Ukraine that go through Black Sea and Sea of Azov. The war between Russia and Ukraine has already impacted India’s fertiliser supplies in a big way. India, which is the world’s largest urea importer, also imports phosphatic and potassic fertilisers.
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