‘India Marine Insurance Pool’Image Credit source: ai generated
The ongoing geopolitical tension and war situation around the world has made seaborne trade difficult. Foreign insurance companies often step back in such crisis situations or increase the premiums so much that freight transportation becomes very expensive. To eliminate this problem from its roots, the Central Government has taken a big decision. Now Indian business will not have to depend on foreign insurance companies amidst the waves of the ocean. Recently the government has approved ‘India Marine Insurance Pool’ with sovereign guarantee of Rs 12,980 crore. This step will not only strengthen the country’s economy, but will also act as a big protective shield for the traders involved in import-export.
Foreign dependency ends, now your own insurance, your own terms
The turmoil at the international level has made maritime trade routes unsafe. Due to this, the risk of loss of ships and goods worth crores of rupees loaded in them has not only increased, but the cost of insurance has also started skyrocketing. Till now, Indian ships had to rely solely on international ‘Protection and Indemnity’ (P&I) clubs to cover third-party liabilities such as oil spills, ship collisions, wreck cleanup or crew injuries. In case of war or any international sanctions, these foreign companies immediately withdraw their coverage. In such a critical time, there was a dire need for an indigenous insurance structure to save the country’s business from coming to a halt, which is now going to be completed.
Who will get the direct benefit of the guarantee of Rs 12,980 crore?
This indigenous pool was approved in the Union Cabinet meeting chaired by Prime Minister Narendra Modi. After this decision, Information and Broadcasting Minister Ashwini Vaishnav clarified that this pool will ensure affordable insurance coverage to ships passing through foreign and unstable sea routes. The scope of this scheme will cover all those ships which are carrying the Indian flag, which are under Indian control, or which are visiting Indian ports.
The government is giving a sovereign guarantee of Rs 12,980 crore for this. This means that if there is any major accident at sea or there is loss due to war, the government itself will stand as a shield with this huge fund. This will cover all risks associated with maritime trade, including the ship’s machinery, its cargo and the risk of war.
Big masterstroke of self-reliance in shipping sector
This is not just an insurance scheme, but a strong mechanism to make India self-reliant in maritime trade. Only the member insurers included in this pool will issue policies, the size of which will initially be around Rs 950 crore. Through this, a complete indigenous ecosystem of risk assessment (underwriting), claims settlement and legal expertise will be created at the local level in India. To keep this entire system transparent and smooth, a special governing body will also be formed. This step of the government will eliminate the fear of foreign sanctions in the Indian shipping sector and the country’s control over its trade will become stronger.
How will this decision affect our pockets?
Often, when insurance premiums increase on international sea routes, the cost of goods imported from outside automatically increases. It has a direct impact on everything from everyday items to the prices of petrol and diesel. But with our country’s insurance pool in place, freight costs will remain stable and ships will continue to get insurance without any interruption. This step will also play a very important role on the front of controlling inflation.
