Higher deductibles might cover ONGC risks

India’s leading oil exploration company, the state-owned Oil and Natural Gas Corporation (ONGC), has been operating its rigs without an insurance cover for more than a month. A solution to its insurance problems may soon be found.

The country's premier general insurance company, the Mumbai-based New India Assurance Company has appointed a London based insurance broker to find a reinsurer for ONGC's assets with higher deductibles.

The premium rate for ONGC risk is based on the global reinsurance market. Says Mr. K.N. Bhandari, chairman and managing director, New India Assurance, "The present deductible of $2 million in ONGC's policy is considered too low compared to international standards. We are now negotiating for policy deductible from $10 million and going upto $20 million."

As higher deductible results lower premium, Mr. Bhandari feels that ONGC's premium outgo will be more or less remain the same as that of last year, that is, around $19 million. It is learnt that the lowest bid received for insuring ONGC's risk was around $37 million.

The problems in insuring ONGC's assets arose because of its adverse claims ratio and also the shrinkage in the global capacity of underwriting oil business.

Last year ONGC suffered loss to the tune of $ 35 million and the year before it was $ 70 million. During the past five years ONGC has suffered five big losses forcing the global reinsurers to think twice before offering the reinsurance cover.

While New India Assurance will the lead insurer this fiscal - last year it was United India Insurance Company Ltd. The oil major's premium and the risk will be shared by all the four public sector insurance companies.