India approves $1.4 billion maritime insurance pool, hikes inflation-linked allowances

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Several major reinsurers including India’s only state-backed reinsurer GIC Re have either ​withdrawn cover or sharply raised premiums, leaving the industry with limited reinsurance support, Reuters reported earlier this month.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.