IPCL's insurance premium surges almost 50%; to pay Rs 38 crore more

MUMBAI: Reliance-owned IPCL has agreed to pay almost a 50% higher premium this year to cover its plants and machinery and for any loss on account of business interruptions even though rates in the insurance market have softened. Insurers have demanded higher premium since they had received Rs 1,000 crore claim last year after one of its pipeline had burst.
Despite a merger between Reliance Industries and Indian Petrochemicals Corporation (IPCL) in 2007, RIL has been taking separate covers for IPCL and itself. Industry sources said that the Reliance-owned IPCL has agreed to pay a premium of Rs 108 crore against Rs70 crore paid last year.

IPCL has taken a cover of Rs 30,000 crore for material damage, and Rs 6,000 crore for business interruption. The cover is renewed with effect from October 1.

This year, New India Assurance outbid National Insurance to emerge as the lead insurer. The other co-insurers include ICICI Lombard, National Insurance and Bajaj Allianz and Bajaj Allianz General Insurance.

Officials from private and government-own ed insurance compa nies declined to com ment on the story , while officials from Reliance Industries did not respond to an e mail sent by ET.

According to the d between the firm and the terms agreed between the firm and the insurer, IPCL can make a claim for business interruption only if the interruption is for 35 days or more as against 21 days last year. Business interruption covers loss of income that the company may suffer after shutting plants or facilities due to a disaster. Last year, IPCL had made a claim for business interruption after one of its pipeline burst following heavy rains in Gujarat.

The insurers have set stiff conditions due to difference between the company and the insurance company on the claim, which had prompted each of the insurers to appoint their own surveyor to assess the extent of the damage.

GIC Re, India’s only reinsurer, which had provided reinsurance to this account, suffered a 4% dip in its net profit last year as its underwriting losses rose.

Its highest claim from the domestic market was from IPCL of Rs 1,000 crore.

IPCL, which was floated by the government, was subsequently taken over by RIL. It operated three petrochemical complexes, a naphtha-based complex at Vadodara and a gas-based complex each at Nagothane near Mumbai and at Dahej.