The inferno in Kolkata's business hub Burrabazar may bleed general insurance companies up to Rs 1,200 crore.

This is an initial assessment, but the actual loss to insurers will be known after the fire is completely doused and claims start pouring in.

The fire has come as a bad news for general insurance companies, which are already under pressure due to heavy discount war in 2007-08. After detariffing of prices, the growth in premium collection has halved to 12 per cent in April-November of 2007-08.

A 13-storeyed building at the Burrabazar wholesale market has turned into a towering inferno since Saturday morning despite efforts to douse by fire brigade and the Army. Initial estimates suggested that about 2,500 shops may have been gutted in the fire.

However, given poor insurance coverage of property and valuables by traders, it is expected that only 50 per cent of the shops might have some sort of insurance coverage.

"Claims will depend on insurance coverage of property and items," said Kolkata-based National Insurance Company's (NIC) chairman and managing director V Ramasaamy. However, he has no doubts about the gravity of the situation and insurance claims. NIC is the largest general insurance player in Kolkata.

"We are anticipating losses. Out of the 2,500 shops gutted, 50 per cent might have insurance coverage," said S K Nasipuri of Oriental Insurance Company, which has a 15 per cent pie in the general insurance business in Kolkata.

Taking an average of Rs 1 crore loss for each of the 1,250 shops, the claims could go up to Rs 1,250 crore, said Nasipuri. The loss in the fire is likely to be borne by 12 public and private sector general insurance companies, who might have insured properties and items in Burrabazar.

However, experts say the insured losses will be limited compared to actual loss as all traders might not have taken coverage.

"With dramatic drop in fire coverage premiums (50-60 per cent) after detariffing this year, it is silly not to insure properties and valuables at shopping complexes and markets," said Pavanjit Singh Dhingra of Prudent Insurance Brokers. The cumulative losses are very large at malls and shopping centres if fire breaks out, he said.