The race for cover

The last time Ravi Parameshwaran, Director (Finance), The Park Hotel, Chennai, took a terror cover for his 5-star deluxe was over a year ago, terrorism was not on top of his mind in this peaceful southern metropolis. Last fortnight’s terror attacks on luxury hotels in Mumbai has the 45-year-old very concerned.

His priority now is to increase the already existing Rs 10-crore terror cover on the hotel property, even though the hotel has a comprehensive cover for all calamities of Rs 100 crore. “We can’t relax and say it will never happen to us. We just have to prepare ourselves to the best of our ability,” says an upset Parameshwaran.

Across the country, scores of luxury and star-rated hotels, institutions and buildings, are rushing to enhance the scope of existing insurance or seek fresh cover. General insurance companies are seeing a surge in enquiries since the last fortnight and top executives, too, are seeking additional cover. Says Rajiv Kumaraswami, Head (Reinsurance), ICICI Lombard: “Of late, there has been increased demand from individuals and companies for terror cover and we are looking at addressing this with new policies.”

Fortunately for India Inc., terror cover was the priority of the insurance industry ever since the Mumbai serial car bomb blasts of March 12, 1993, that severely damaged the Bombay Stock Exchange building. A common pool managed by the General Insurance Corporation of India (GIC) with an initial corpus of Rs 200 crore, which has now grown to Rs 1,200 crore, was set up to compensate claims for terror attacks. While many companies are insured with standard policies like damage to civil structures due to natural causes, terror cover is available at an extra cost and depends on the nature of the business. Terror insurance also covers third-party liability insurance, particularly useful for hotels and offices as this covers loss of life.

One big question is whether the Rs 1,200-crore terror corpus is enough to cover terror across the country. “The corpus has sufficient funds now, but if a similar scale catastrophe occurs again in the next few months, premium rates could harden,” says Anoop Harjani, President, Optima Insurance Broking. Incidentally, premium rates for third-party liability insurance hardened by 30 per cent for all types of policies.

As of now, top executives have limited terror cover choices as only a few companies have launched such products. It’s usually the personal accident policy that helps bridge the gap for the individuals affected by terror. Terror attacks are not specifically included in a personal accident policy, at the same time, they are not excluded either. Says G.V. Rao, a risk management consultant, and former CMD, Oriental Insurance Company: “There are companies that don’t offer terror cover explicitly, so it’s better to check the personal accident policy for inclusion.”