Maritime trade is considered the backbone of the global economy, but when geopolitical tensions increase, shipping is the first to be affected. Recently, due to increased tension in the Strait of Hormuz, a huge increase in war-risk premiums and incidents of cancellation of insurance cover have raised alarm bells for an import-export dependent country like India. To deal with this challenge, the government has taken the initiative to create Bharat Maritime Insurance Pool (BMIP), so that Indian business can get cheap and reliable insurance even in difficult circumstances. Let us tell you about it in detail, what it is and why is it important?
The increasing tensions on global labels, especially the instability in the Middle East, have once again brought to the fore the importance of marine insurance. A rise in war-risk premiums of up to 300% for ships transiting through sensitive sea lanes such as the Strait of Hormuz and the withdrawal of cover by many international insurers have increased the risks for India. In such a situation, Bharat Maritime Insurance Pool (BMIP) is emerging as a strategic step.
The plan is worth so many crores
The government has approved this domestic insurance pool with a sovereign guarantee of Rs 12,980 crore. Its objective is to provide affordable and continuous insurance facility to ships visiting Indian ports, especially when the global insurance market is uncertain. Till now, Indian shipowners have been largely dependent on foreign clubs for protection and indemnity (P&I) insurance, which operate from global centers like London and have more than 150 years of experience.
Challenges for BMIP
In the report of Business Today, experts say that the success of BMIP will not be easy. It will need a strong legal framework, adequate funding and effective reinsurance support to win trust globally. Also, active participation of Indian shipowners is also very important, because without adequate risk pool this model will not be sustainable.
India’s contribution to global shipping is currently only 0.8%, but foreign insurers have to pay huge premiums every year. BMIP can be an important step towards reducing this dependence and developing insurance capacity within the country. If implemented with the right strategy, expertise and global standards, it will not only strengthen the Indian shipping industry but will also prove to be a strong shield to protect the trade in times of crisis.
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