Flood insurance claims on a high
Insurance companies are gearing up in anticipation of large claims from water-logged industrial units in the wake of the heavy floods.
Insurance companies are gearing up in anticipation of large claims from water-logged industrial units in the wake of the heavy floods that have submerged several industrial zones in western India, hitting a range of companies including oil giant ONGC and cement maker Ultra Tech.
Besides large corporate house plants, hundreds of small and medium enterprises have been hit in Gujarat, including the roaring diamond and textile businesses which feed manufacturers, artisans and traders.
Mumbai's July 26 flooding last year and the claims that followed have given a wake-up call to the state-dominated commercial insurance industry. Officials estimate that the claims could add up to as much as Rs. 1,500 to 2,000 crore. However, the value of the claims would depend on the duration of water-logging in the premises of the units that include factories and warehouses.
“The longer it remains the larger is the likelihood of “business profit claims” as it has a direct bearing on the functioning of the units”, said V. Ramakrishna, managing director of India Insure Broking, a Baroda-based insurance broking house. Baroda, Surat and other towns of highly industrialised Gujarat are among the worst hit after monsoon rains unleashed a fury of swirling waters.
Smarting under heavy losses suffered in the wake of the Mumbai floods last year, most of the insurance companies had parked most of the funds in reinsurance products to hedge losses in the eventuality of a natural disaster.
“It is too preliminary to put an exact figure on the claims that could be made. So far no reports of claims have come in. But the Mumbai floods last year has given me an experience, where insurance companies had ended up losing money. Therefore, we had recently gone in for a fresh layer of reinsurance”, said M. Ramadoss, chairman and managing director of Oriental Insurance Company.
Ramakrishna said the claims made in the aftermath of the Mumbai floods last year totalled more than Rs 4,200 crore. This included more than Rs 1,000 crore from the private sector.
The floods have had a severe impact on a key infrastructure driver — natural gas production. Oil and Natural Gas Corporation’s (ONGC) Hazira gas processing complex , which was hit by floods on the midnight of August 7-8, remains closed. ONGC estimates its loss at Rs 19 crore a day. ONGC estimates losses at Rs 19 crore a day. Gas stoppage has partially affected GAIL’s Hazira-Bijaipur-Jagdishpur (HBJ) pipeline. The Hazira-Bijaipur section of the pipeline is shut, but the Bijaipur-Jagdishpur section continued ferrying gas from Petronet LNG Ltd.’s (PLL) Dahej terminal.
Insurance companies are expected to come out with different products for flood prone areas after a new tariff regime starts in January next year.