Chennai: If you thought corporate houses take out an insurance policy to cover various perils then it is time to change that notion, for there are companies that transfer some funds to an insurance reserve account and save on the premium outgo.

One such company is the country''s premier power transmission company Power Grid Corporation of India Limited.

The company''s assets are subject to risks like fire, earthquakes and other natural disasters, terrorist attacks, breakdowns, failures or substandard performance of equipment, improper installation or operation of equipment and others.

Says R T Agarwal, general manager (F&A), "After detailed studies of our loss experience vis a vis the premium outgo we found the company will be better off with an insurance reserve fund."

At the end of FY07 the insurance reserve fund stood at around Rs80 crore.

The company transfers 0.1 per cent of its gross block of fixed assets (except for valve halls of HVDC Bi-pole, HVDC equipments and SVC sub stations) to insurance reserve account every year. For the FY07 Power Grid Corporation''s gross block was Rs29,014 crore including the valve halls of HVDC Bi-pole, HVDC equipments and SVC sub stations.

Even after the recent downward rate revision in the fire and engineering insurance policies, self-insurance works out cheaper for Power Grid Corporation.

The current premium rate to cover transmission towers and related equipments is Rs.1.125 per thousand rupees of sum insured. There are discounts available based on the safety measures a company has taken.

Earlier the premium rate was Rs1.50 per thousand of sum insured.

According to Agarwal the company covers its employees / workers under a group personal accident insurance policy. Power Grid Corporation also covers its telecom equipments under a fire insurance policy.

Meanwhile the company is hitting the market with a premium maiden initial public offering (IPO) with 57.39 crore equity shares of Rs10 each at a price to be decided on a book building process.

The price band is fixed at Rs44 per share at the lower end and Rs52 per share at the upper end.

The issue comprises 38.2 crore fresh shares and 19.13 crore shares diluted by the Government of India. The issue is to part fund the company''s ongoing projects worth Rs12,707 crore.