Refineries processing crude oil imported from Iran will get insurance cover next month. In the absence of such cover, oil refining companies had either stopped, or drastically reduced, Iranian crude imports as the country is under US sanctions that restrict foreign re-insurers from compensating in case of a claim.
Insurance pool
According to Financial Secretary Rajiv Takru, “We are ready to set up the Indian Energy Insurance Pool in the next few weeks. The insurance companies have already paid General Insurance Corporation, which will be managing the pool.
The Oil Industry Development Board is expected to put up Rs 500 crore in the next few days, while they have committed that the next instalment of Rs 500 crore will be put up by April.”
The Rs 2,000-crore fund is to be created through contributions by State-owned insurers, which will collectively provide Rs 1,000 crore, while the balance will be pooled in by the Oil Industry Development Board.
Govt support
The government has agreed to provide a reinsurance support in the form of a sovereign guarantee of Rs 1,000 crore.
A senior official from a State-run insurer said, after the pool is set up, there will be no ambiguity in case of a claim for the oil refineries as the sanctions clause will be removed from the insurance contracts.
The energy insurance pool is being set up to provide insurance cover to domestic refineries such as Mangalore Refinery and Petrochemicals Ltd, a subsidiary of Oil and Natural Gas Corporation; Hindustan Petroleum Corp Ltd; and Essar Oil that process crude oil from Iran.