India has approved a 129.8-billion-rupee ($1.4 billion) guarantee for a maritime insurance pool, a minister said on Saturday, as wars and sanctions prompt insurers to withdraw cover, threatening trade flows.
The pool will run for 10 years and can be extended by a further five years, Information and Broadcasting Minister Ashwini Vaishnaw said.
“There was a need for a domestic maritime risk covering pool to maintain sovereignty and continuity of trade in face of withdrawal of coverage due to sanctions or due to geopolitical tensions,” according to a statement issued by the government.
Several major reinsurers including India’s only state-backed reinsurer GIC Re have either withdrawn cover or sharply raised premiums, leaving the industry with limited reinsurance support, Reuters reported earlier this month.
Reinsurers provide vital support to insurers by helping them spread risk. Among issues leading the industry to scale back coverage are the Iran war and Western sanctions on Russia.
The insurance pool will cover all maritime risks, including hull and machinery, cargo and war risk, the statement said.
Policies will be issued by member insurers using combined underwriting capacity of about 9.50 billion rupees.
INFLATION-LINKED ALLOWANCE HIKED
The government said in a separate statement that it had also raised inflation-linked allowances by 2%, starting January 1.
Dearness allowance and dearness relief are government-mandated payments designed to offset inflation for employees and pensioners. The allowances are revised twice a year based on the consumer price index.
India’s CPI rose to 3.40% year-on-year in March from 3.21% in February, government data showed earlier this month.
Price pressures have increased due to higher cooking gas costs, although government tax cuts have shielded consumers from the full impact of higher global oil prices.