The shipping ministry is considering a review of the War Risk Insurance scheme to bring it in line with similar schemes being operated internationally. An internal study done by the ministry has suggested that a separate team be set up to update this scheme.

The study pointed out that war risk coverage for hull and machinery and personal and indemnity (P&I) risks provided by the Indian government was inadequate.

Even the cover for P&I risks, which includes liabilities for loss of life, personal injury, wreck removal and collision, is restricted to Rs 10 crore (Rs 100 million). In comparison, P&I clubs internationally provide a war risk cover up to the market value of the ship.

War cover

• War risk coverage for hull and machinery and personal and indemnity (P&I) risks provided by the Indian government is inadequate.
• The Indian government charges very high premium compared with international levels.
• The War Risk Insurance scheme applies during peacetime only.

Another major difference is that globally the cover is provided at a much lower level of premium. The Indian government charges a premium of 0.08 per cent annually on the market value of the ship, whereas in London the premium is a fifth of that paid in India.

The study also reveals that in the last 50 years, the return on the retained premium of the Indian government was more than the annual premium received from the entire shipping industry.

This was despite loss payments, which would have been low as not more than four claims had been made on this account in the past half a century.

As the government has such a huge surplus fund on account of war risk premiums, the study has suggested that the option of giving this cover free of cost should be considered by it.

It also recommended that ship owners be allowed to place their war risk cover outside India so that they can reap the benefits of lower premiums being charged abroad.

This would open up cheaper options for the Indian ship-owners. Moreover, private insurance companies should also be allowed to administer this scheme.

The War Risk Insurance scheme applies during peacetime only. If a war is declared the government can cancel the cover after giving a 14-day notice.