Spurt in premiums for war, political violence cover post Pahalgam attack

BATTLE SHIELD: The availability and terms of coverage also vary according to the property’s location, particularly in high-exposure areas such as Jammu and Kashmir and other border regions.

Following the terrorist attack at Pahalgam in April and the subsequent ceasefire earlier this month, insurance premiums for war and political violence cover available for Indian companies have risen “significantly,” according to insurance brokers.

Though Indian insurers are not offering any property insurance policies for war and conflicts to Indian corporates, policies covering war and political violence are being made available from international reinsurers which had been issued with stricter limits and conditions.

Deepak Madan, Head Commercial Lines, Large Account Practices at Prudent Insurance Brokers said, “Property insurance policies for war and conflict-related situations are typically excluded from insurance cover so there was no impact at all in premium. And thus geopolitical tensions usually do not influence premium rates.”

“But several companies had purchased war and political violence coverage which is a reinsurance-backed cover, available primarily through international markets. The availability and terms of coverage also vary according to the property’s location, particularly in high-exposure areas such as Jammu and Kashmir and other border regions,” Mr. Madan said.

Hari Radhakrishnan from Insurance Brokers Association of India (IBAI) said since the geopolitical risk had gone up considerably due to various conflicts such as Ukraine, Gaza, Iran and wider Persian Gulf, and Indo-Pak., there had been a downstream impact on insurance and reinsurance markets.

“Since these conflicts can affect oil prices or commodity prices, there can be impact on underwriting and claims in the form of increased costs, increased restoration periods, logistical challenges. Insurers and reinsurers have to factor these into their operating considerations,” he said.

He said since the Indo-Pak. conflict is new and still developing even though there is a pause in active hostilities or live action, the impact might be less visible in the immediate term but could be more visible on a longer-term basis.

On the impact on the supply chain due to disruptions caused by geopolitical developments, he said, “When there are supply chain disruptions, certain insurance products such as trade credit insurance, contingent business interruption covers [coverage for suppliers and customers premises] , see a demand spike which is also being witnessed.”