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When it comes to shipping goods from country A to country B, the costs are just not restricted to shipping costs and the product costs. International shipping often requires insurance payments for every container, commodity or produce shipped across the seas.
For India, most of these insurance coverages come from Western banks, but these come with conditions tied to geopolitical changes. Following the Russia Ukraine war, several shipments from Russia were stuck because many banks refused to cover these shipments due to US imposed sanctions.
Recently, the US-Iran war has seen a wave of refusals from such banks, as they generally refuse to cover shipments to and from conflict zones. In many cases, banks refuse or rescind such marine insurance cases on short notice after a war breaks out, especially seen during the escalating conflict in the Middle East.
For a country like India, that is deeply dependent on imported energy and commodity inflows, relying entirely on foreign controlled insurance systems poses a strategic risk that is apparent only during moments of crises.
With more than 70% of our trade volumes coming from sea, almost everything India buys or sells- crude oil, LPG, fertilizers, commodities- come from international shipments. If shipping insurance becomes unsure due to sanctions or geopolitical issues, this can result in supply chain issues for India as well.
The solution
To address this issue, the cabinet has approved the launch of the Bharat Maritime Insurance Pool (BMIP), a reinsurance solution that will be managed by the state-run General Insurance Corporation of India (GIC Re). This will be a pooled, two tier domestic reinsurance structure that will keep marine insurance costs low.
This will consist of two tiers.
The first tier will see domestic and private insurance companies pooling capital underwriting capacity of about ₹950 crore to convert routine claims, cargo loss, hull damage or minor environmental issues that can be paid directly from this pool.
In the case of a catastrophic incident- the second tier will be deplyed, where the government of India will step in with a sovereign guarantee of ₹12,980 crore as the ultimate line of defence.
Early Traction
The platform is already seeing major domestic industrial players like Vedanta, Balrampur Chini Mill s and Hogar Offshore shifting their marine insurance needs to BMIP backed pollicies.
For India, the long term goal is to position BMIP as an alternative to Western insurance providers, so that even overseas suppliers can trust the BMIP as well.
Over the years, this domestic insurance alternative is expected to protect national trade interests during times when global trade is hampered due to geopolitical or environmental issues. This will help keep our supply chains secure even during challenging times.
English (US) ·