Annual terrorism risk cover rates will drop 19 to 16 per cent from April 1 following improved claims experience and the withdrawal of premium tariffs on general insurance products like fire, engineering, and motor.
The premium on industrial risk will drop 16 per cent to 12.5 lakh (Rs 1.25 million) and non-industrial risks like shops will cost Rs 7.5 lakh (Rs 750,000), against the current Rs 15 lakh (Rs 1.5 million) and Rs 10 lakh (Rs 1 million), respectively, for a total sum insured per location of up to Rs 500 crore (Rs 5 billion).
The premium will drop 19 per cent from Rs 52.5 lakh (Rs 5.25 million) to Rs 42.5 lakh (Rs 4.25 million) a year for industry and from Rs 32.5 lakh (Rs 3.25 million) to Rs 25.5 lakh (Rs 2.55 million) for shops and offices if the total sum insured is up to Rs 2,000 crore (Rs 20 billion).
There will be no change in the annual premium rates for houses of Rs 5 lakh (Rs 500,000).
Terrorism risk cover is paid through a pool which was formed after foreign reinsurers withdrew from India following the 9/11 attacks in the US. Government-owned General Insurance Corporation (GIC) manages the pool, which currently holds Rs 600 crore (Rs 6 billion).
The Terrorism Risk Insurance Pool, which was formed in 2002 to provide risk cover under a pool mechanism, has filed the revised rates with the Insurance Regulatory and Development Authority.
"The rate cut will encourage all companies to go in for terror cover. The compensation limit may also go up with an increase in the pool size in due course," said Pavan Dhingra of Prudent Brokers.
The annual premium income from underwriting terror cover is about Rs 200 crore (Rs 2 billion).
Big-ticket firms like Indian Oil and GAIL, five-star hotels and multinationals in India have taken this cover. The sum insured covers material damage and loss of profit due to an act of terror. No brokerage or agency commission is paid by policy-holders for such covers.
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