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India: US $ 4.5 billion guarantee likely for Iran insurance pool
NEW DELHI: The government is considering providing Sovereign Guarantee for Rs 24,000 crore ($4.5 billion) to the Indian Energy Insurance Pool the fund being created to provide insurance to domestic refineries that have been refused cover by European re-insurers for processing Iranian crude. The decision was taken at a meeting called by petroleum secretary Vivek Rae after senior refining company executives expressed concerns over the inadequacy of the insurance pool.
TOI had on April 4 first reported the government's move to set up the insurance pool with a corpus of Rs 2,000 crore. The need for the pool has arisen because under the US and the European Union (EU) sanctions, global insurers have added a "sanctions clause" in their contract that limits the amount to be paid in case of a claim. As a result, domestic insurance companies have refused cover to refineries processing Iranian oil as they could not get reinsurance from European counterparts. Reinsurance makes up for 90% of insurance cover.
The oil ministry and the Oil Industry Development Board (OIDB) a body under the ministry's wings were to jointly commit Rs 1,000 crore to the pool. The remaining Rs 1,000 crore was to come from general insurance companies. Private sector general insurance companies could voluntarily chip in with additional capacity, with matching commitment from the ministry and OIDB.
While deciding the course for setting up the insurance pool, the government was envisaged to be providing Sovereign Guarantee for Rs 10,000 crore. But at the latest meeting, refining company executives said the Maximum Permissible Loss liability in case of any claim for private sector Essar Oil and state-run MRPL two of the biggest consumers of Iranian crude alone stood at Rs 11,000 crore and Rs 7,000 crore, respectively.
The executives said the total maximum permissible limit for all refineries using Iranian crude amounted to some Rs 24,000 crore. Since the insurance pool corpus was inadequate to provide reinsurance cover, the refiners would not be able to provide comfort to lenders when raising loans from the market unless the government guaranteed the total maximum permissible liability of all the affected refineries.
Pointing out that the insurance pool may not be workable without adequate government guarantee, Rae asked the departments of financial services and economic affairs in the finance ministry to examine the quantum of required sovereign guarantee in a fortnight.
Rs 24k cr guarantee likely for Iran insurance pool - The Times of India
NEW DELHI: The government is considering providing Sovereign Guarantee for Rs 24,000 crore ($4.5 billion) to the Indian Energy Insurance Pool the fund being created to provide insurance to domestic refineries that have been refused cover by European re-insurers for processing Iranian crude. The decision was taken at a meeting called by petroleum secretary Vivek Rae after senior refining company executives expressed concerns over the inadequacy of the insurance pool.
TOI had on April 4 first reported the government's move to set up the insurance pool with a corpus of Rs 2,000 crore. The need for the pool has arisen because under the US and the European Union (EU) sanctions, global insurers have added a "sanctions clause" in their contract that limits the amount to be paid in case of a claim. As a result, domestic insurance companies have refused cover to refineries processing Iranian oil as they could not get reinsurance from European counterparts. Reinsurance makes up for 90% of insurance cover.
The oil ministry and the Oil Industry Development Board (OIDB) a body under the ministry's wings were to jointly commit Rs 1,000 crore to the pool. The remaining Rs 1,000 crore was to come from general insurance companies. Private sector general insurance companies could voluntarily chip in with additional capacity, with matching commitment from the ministry and OIDB.
While deciding the course for setting up the insurance pool, the government was envisaged to be providing Sovereign Guarantee for Rs 10,000 crore. But at the latest meeting, refining company executives said the Maximum Permissible Loss liability in case of any claim for private sector Essar Oil and state-run MRPL two of the biggest consumers of Iranian crude alone stood at Rs 11,000 crore and Rs 7,000 crore, respectively.
The executives said the total maximum permissible limit for all refineries using Iranian crude amounted to some Rs 24,000 crore. Since the insurance pool corpus was inadequate to provide reinsurance cover, the refiners would not be able to provide comfort to lenders when raising loans from the market unless the government guaranteed the total maximum permissible liability of all the affected refineries.
Pointing out that the insurance pool may not be workable without adequate government guarantee, Rae asked the departments of financial services and economic affairs in the finance ministry to examine the quantum of required sovereign guarantee in a fortnight.
Rs 24k cr guarantee likely for Iran insurance pool - The Times of India
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