Source: Business Standard
Context
Marine war-risk insurance premiums, which had already started normalising following the launch of the Bharat Maritime Insurance Pool (BMIP), could soften further if the proposed US-Iran agreement leads to a sustained reopening of the Strait of Hormuz and a reduction in regional tensions. The war-risk premiums had shot up during the US-Iran conflict and the maritime blockade, but are now easing with the diplomatic resolution. The Bharat Maritime Insurance Pool (BMIP) is India’s indigenous mechanism to provide war-risk cover to Indian-flag shipping during geopolitical crises, reducing dependence on foreign reinsurance.
The Recent Trend
- Marine war-risk premiums had already started easing following the BMIP launch.
- Could soften further with:
- Sustained reopening of the Strait of Hormuz.
- Reduction in regional tensions.
- Implementation of US-Iran deal.
What is the Bharat Maritime Insurance Pool (BMIP)?
- An indigenous mechanism to provide war-risk cover to Indian-flag shipping during geopolitical crises.
- Aims:
- Reduce dependence on foreign reinsurance.
- Provide cost-effective war-risk cover.
- Strengthen India’s maritime sovereignty.
- Launched in 2025-26 by the Government of India through the General Insurance Council (GIC) of India and other Indian insurers.
- Backers: General Insurance Corporation of India (GIC Re), public and private general insurers, and government support.
What is War-Risk Insurance?
- A specialised marine insurance policy that covers losses arising from:
- War, hostilities, civil war.
- Strikes, riots, civil commotions.
- Detention, seizure, capture.
- Mines, torpedoes, bombs.
- NOT covered by standard hull and machinery (H&M) marine insurance policies.
- Premiums are highly sensitive to geopolitical risk.
- Premiums can rise 10-20 times during active conflicts.
Marine Insurance Categories
- Hull Insurance: Covers damage to the vessel itself.
- Cargo Insurance: Covers damage to cargo during transit.
- War-Risk Insurance: Covers war and political risk losses.
- Protection and Indemnity (P&I) Insurance: Covers third-party liability (collision damage, pollution, crew injury).
- Loss of Hire Insurance: Covers loss of charter income during repairs.
India’s Marine Insurance Market
- Major Indian marine insurers:
- GIC Re (Reinsurer).
- The New India Assurance.
- United India Insurance.
- Oriental Insurance.
- National Insurance.
- ICICI Lombard.
- HDFC ERGO.
- Bajaj Allianz General Insurance.
- Tata AIG.
- Total marine insurance premium: about ₹3,500-4,000 crore annually.
About GIC Re (General Insurance Corporation of India)
- India’s only reinsurer.
- Founded: 1972.
- Headquartered: Mumbai.
- Public sector undertaking under the Ministry of Finance.
- Functions:
- Reinsurance for domestic and international markets.
- Lead reinsurer for Indian general insurance market.
- One of the top 10 reinsurers globally by premium.
About IRDAI
- Insurance Regulatory and Development Authority of India.
- Statutory body under the IRDA Act, 1999.
- Headquartered: Hyderabad.
- Functions:
- Regulate insurance industry.
- Protect policyholder interests.
- Promote orderly growth of insurance.
- Current Chairperson: Ajay Seth (since January 2025).
Practice MCQs
Q1. With reference to marine war-risk insurance trends, consider the following statements:
- Marine war-risk premiums had been rising due to the US-Iran conflict and maritime blockade.
- Premiums have started normalising following the launch of the Bharat Maritime Insurance Pool (BMIP).
- Further softening is expected with the US-Iran preliminary agreement and Strait of Hormuz reopening.
- War-risk insurance is the same as standard hull insurance.
How many of the above statements are correct?
(a) Only one (b) Only two (c) Only three (d) All four (e) None
(Statement 4 is wrong; war-risk insurance is a separate, specialised policy that covers risks not included in standard hull insurance.)
Q2. With reference to the Bharat Maritime Insurance Pool (BMIP), consider the following statements:
- BMIP is an indigenous mechanism to provide war-risk cover to Indian-flag shipping.
- BMIP reduces dependence on foreign reinsurance during geopolitical crises.
- BMIP is backed by GIC Re and Indian general insurers with government support.
- BMIP is a foreign mechanism imposed on Indian shipping.
Which of the above are correct?
(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
(Statement 4 is wrong; BMIP is an indigenous Indian mechanism, NOT a foreign one.)
Q3. With reference to marine insurance categories, consider the following statements:
- Hull insurance covers damage to the vessel itself.
- Cargo insurance covers damage to cargo during transit.
- P&I insurance (Protection and Indemnity) covers third-party liability.
- War-risk insurance is part of standard hull and machinery (H&M) marine insurance.
Which of the above are correct?
(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
(Statement 4 is wrong; war-risk insurance is a SEPARATE specialised policy that covers risks NOT included in standard H&M marine insurance.)
Q4. With reference to GIC Re, consider the following statements:
- GIC Re is India’s only reinsurer.
- GIC Re was founded in 1972 and is headquartered in Mumbai.
- GIC Re is a public sector undertaking under the Ministry of Finance.
- GIC Re is the world’s largest reinsurer.
Which of the above are correct?
(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
(Statement 4 is wrong; GIC Re is one of the top 10 reinsurers globally, NOT the largest. The world’s largest reinsurer is typically Munich Re or Swiss Re.)
Q5. With reference to India’s shipping and maritime sector, consider the following statements:
- About 90 per cent of India’s EXIM trade is by sea.
- India has about 2,50,000 seafarers working globally.
- The Maritime India Vision (MIV) 2030 is a 10-year roadmap for port and maritime sector development.
- India’s shipping sector is fully self-sufficient and does not rely on global infrastructure or markets.
Which of the above are correct?
(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
(Statement 4 is wrong; India’s shipping sector is significantly integrated with global infrastructure (ports, insurance, reinsurance, fuel, etc.), NOT self-sufficient.)
Answer Key
- (c), Statements 1, 2, 3 are correct; Statement 4 is wrong because war-risk insurance is a separate, specialised policy.
- (a), Statements 1, 2, 3 are correct; Statement 4 is wrong because BMIP is an indigenous Indian mechanism.
- (a), Statements 1, 2, 3 are correct; Statement 4 is wrong because war-risk insurance is separate from standard H&M.
- (a), Statements 1, 2, 3 are correct; Statement 4 is wrong because GIC Re is among the top 10 reinsurers, not the largest.
- (a), Statements 1, 2, 3 are correct; Statement 4 is wrong because India’s shipping sector is significantly integrated with global infrastructure.
Exam Relevance
| IRDAI Grade A | Very high importance, BMIP, marine insurance, GIC Re, reinsurance |
