Oil spills spur hefty e-insurance

Oil spills spur hefty e-insurance

Little-Known Environmental Pollution Liability Policies In Demand

Sharad Vyas | TNN

Mumbai: Sometimes a catastrophe can bring fortune in its wake for some. And the two recent environmental disasters involving oil spills in the sea—the British Petroleum spill in the Gulf of Mexico in April and the August 7 accident when two ships collided off Mumbai's coastline—have come as a boon for insurance companies.

    Thanks to the disasters, a littleknown insurance product called Environmental Pollution Legal Liability is among the most sought after. Many insurance firms are reportedly on the brink of record deals with global oil companies looking to secure their Indian operations. An insurance official said he got as as many as five queries a month from MNC sub-contractors asking for cover policies. Indian firms too are lining up with queries.

    Tata AIG, a leading insurance firm, has almost closed a deal to cover an oil MNC's Mumbai operations for $5 million. Others, like HDFC Ergo and ICICI Lombard, have also sewn up policies up to $2 million since the spill.

Tar balls, oil patches again appear off Colaba

    Fresh patches of oil, tar balls and debris were seen along the Colaba coastline on Monday, prompting environment minister Suresh Shetty to say that if Mumbai port trust authorities did not start cleaning up the mess, the state government will have to initiate a clean-up. P 7 Cheap insurance policies an attraction

    One of my earliest pitches—with the limit of indemnity reaching up to $25 million—was made to a client before the BP oil spill in Gulf of Mexico in April. But the deal was only formalised recently after much awareness was generated from the spill in Mumbai. Thereafter, many more people, who were aware of our products but uninterested, have lined up to get coverage,'' said an insurance underwriter from HDFC Ergo.
 
   Most of the oil MNCs, insurance agents say, have their global operations covered against oil and energy disasters, including oil spills and gas leaks. But after the Mumbai spill—which was caused by a collision between M V Khalijia-3 and MSC Chitra on August 7—the MNCs are seeking a dedicated cover for Indian operations as well. The reasons, it is believed, are the availability of cheap products and multiple options.

    "For insurance cover of up to $1 million, the premium in India does not cross more than Rs 1.5 lakh. This is a small cost to pay to ensure protection against any environmental disaster,'' said a Tata AIG underwriter. Spotting the opportunity in this situation, the companies too have jacked up prices of their product by at least 15%. Many frequently cite examples of the oil spill to create awareness among clients and sell the product.

    "Earlier, few in the oil and energy sectors were aware of these products, but now there is a great amount of awareness,'' said an insurance official. Insurance companies have even launched a new product, separate from the requirements of the Public Liability Insurance Act, which was formed by the environment ministry after the Bhopal gas tragedy, making it mandatory for oil and energy firms to have insurance against chemical and gas disasters.

    The latest modified products are asking oil companies to identify site history, surrounding environmental and land use and even environmental surveys, audits and investigations conducted at the site in the past five years. "All this will help in assessing the extent of expenses that could be incurred in clean-up operations and other events in the aftermath of a disaster.

The MSC Chitra-M V Khalijia 3 collision off Mumbai has increased awareness leading to oil firms looking at cover worth millions of dollars

SEA OF TROUBLE: A salvage ship (at right) lifts cargo off the deck of the wreck of the MSC Chitra in the sea off Mumbai on Monday