International reinsurers have imposed a 0.05 per cent war risk surcharge on marine cargo routed through the Persian Gulf. This is expected to push up prices of goods transported through the region to and from India.

The London war risk committee, which decides on the imposition of a surcharge, has sent notices to insurers saying the hike will come into effect immediately. No increase has, however, been announced in categories like aviation and marine hull so far, though insurers are expecting one shortly.

International reinsurers have said a seven-day notice will be given in the case of an attack on Iraq. The extent of the surcharge and the modalities will be declared once war breaks out.

The war could also affect the renewal of insurance cover of some corporates over the next few months.

While Air-India has managed to evade any impact of the war by renewing its policy with effect from April 1, 2003, the annual cover for Jet Airways and Oil and Natural Gas Corporation are being negotiated with international reinsurers.

“Their premiums will depend on whether the US launches an offensive and the duration of the war,” said an executive with a public sector insurance company.

Executives with insurance companies said they had not received any notices so far, but were expecting a heavy surcharge on vessels and aircraft moving through the Persian Gulf.

"The surcharge will be imposed only if war breaks out," a leading reinsurance broker said.

Brokers said the surcharge could be as high as 100 per cent, which was the case with certain categories of business during the Gulf War in 1991.

If there is an increase in marine hull rates, ships with Indian flags will be less affected, compared to those registered in other countries, because they are regulated by a government order empowering insurers to raise premiums. Usually, the government notifies the increase after a lag.

After the terrorist attacks in the US on September 11, 2001, airlines across the world had to bear a huge insurance surcharge for terrorism.

Also, when the tension between India and Pakistan peaked last year, international reinsurers imposed a war surcharge on all vessels using the western coast of India.

International reinsurers notify insurers in advance about the imposition of a surcharge to give them some time to put in place the surcharge.