Understanding Indian Market Terrorism Risk Insurance Pool
The Act of terrorism is defined as an action or series of actions that involve the use of force or violence, or the threat of it, by an individual or group of individuals acting alone or in connection with an organization or government. These actions may be committed for political, religious, ideological, or similar reasons, with the intent of influencing a government or causing fear among the public or a specific group. This definition is recognized under the Unlawful Activities (Prevention) Amendment Act of 2008, as well as other applicable national and state laws that aim to combat unlawful and terrorist activities.
With an average loss ratio of 13.3% over Pool's eleven years of existence, claims experience has been very positive. The Mumbai terrorist attack claims, which were resolved for a total of INR 3769 million, represented the Pool's biggest loss.
What is Indian Market Terrorism Risk Insurance Pool?
The Pool was established in April 2002 as a result of an endeavour by all non-life insurance companies in India to build domestic capacity for providing terrorism insurance coverage following the removal of terrorism reinsurance capacity from the domestic companies' treaties in the wake of 9/11. The Pool enables participating non-life insurance companies to offer terrorism risk insurance in India based on the aggregate underwriting ability of the participating companies and GIC.
Insurances that cover the risk of terrorism
The Pool covers all insurance policies that include terrorism risk along with property insurance. Each member takes part in all relevant policies in proportion to their share, and their liability is equal to the original insurance policy's liability for terrorism risk. The lines covered are:
Industrial All Risks insurance
Fire section of package insurance policies
Fire/Engineering Sections of Miscellaneous policies
The property section of Cellular Network Policies
The property section of Engineering insurance, including the Erection of All Risks Insurance (EAR)
Contractor’s All Risks insurance (CAR)
Contractor’s Plant and Machinery Insurance (CPM)
Electronic Equipment Insurance (EEI)
Civil Engineering Completed Risks (CECR)
Jeweller’s Block Policies (Sec. I & Sec. IV)
On-shore assets of Port Package policies
On-shore assets of off-shore package policies
Stock Floater policies
On-shore drilling rig equipment
ALOP cover in conjunction with CAR/EAR
Any other class of insurance policy that may be specifically agreed by the Pool Underwriting Committee and notified to members from time to time.
The only peril covered is terrorism.
1. Material Damage
This coverage does not compensate for the loss of or damage to property resulting from any combination of the following: -
Loss by seizure or legal or illegal occupation;
Loss or damage caused by: (i) Voluntary abandonment or vacation; (ii) Confiscation, commandeering, nationalisation, requisition, detention, embargo, quarantine, or any result of any order of public or government authority, which deprives the Insured of the use or value of its property;
Loss or damage arising from acts of contraband or illegal transportation or illegal trade;
Loss or damage directly or indirectly arising from or in consequence of the seepage and or discharge of pollutants or contaminants, which pollutants and contaminants shall include but not be limited to any solid, liquid, gaseous or thermal irritant, contaminant or toxic or hazardous substance or any substance the presence, existence or release of which endangers or threatens to endanger the health, safety or welfare of persons or the environment;
Loss or damage arising directly or indirectly from or in consequence of chemical or biological emission, release, discharge, dispersal or escape or chemical or biological exposure of any kind;
Loss or damage arising directly or indirectly from or in consequence of asbestos emission, release, discharge, dispersal or escape or asbestos exposure of any kind;
Any fine, levy, duty, interest or penalty or cost or compensation/damages and/or other assessment is incurred by the Insured or is imposed by any court, government agency, public or civil authority or any other person;
Loss or damage by electronic means including but not limited to computer hacking or the introduction of any form of computer virus or corrupting or unauthorised instructions or code or the use of any electromagnetic weapon. This exclusion shall not operate to exclude losses (which would otherwise be covered under this Policy) arising from the use of any computer, computer system or computer software programme or any other electronic system in the launch and/or guidance system and/or firing mechanism of any weapon or missile;
Loss or damage caused by vandals or other persons acting maliciously or by way of protest or strikes, labour unrest, riots or civil commotion;
Loss or increased cost occasioned by any public or government or local or civil authority’s enforcement of any ordinance or law regulating the reconstruction, repair or demolition of any property insured hereunder;
Any consequential loss or damage, loss of use, delay or loss of markets, loss of income, depreciation, reduction in functionality, or increased cost of working;
Loss or damage caused by factors including but not limited to cessation, fluctuation or variation in, or insufficiency of, water, gas or electricity supplies and telecommunications or any type of service;
Loss or increased cost as a result of threat or hoax;
Loss or damage caused by or arising out of burglary, house-breaking, looting, theft, larceny or any such attempt or any omission of any kind of any person (whether or not such act is committed in the course of a disturbance of public peace) in any action taken in respect of an act of terrorism;
Loss or damage caused by mysterious disappearance or unexplained loss;
Loss or damage directly or indirectly caused by mould, mildew, fungus, spores or other micro-organisms of any type, nature or description, including but not limited to any substance whose presence poses an actual or potential threat to human health;
Total or partial cessation of work or the retardation or interruption or cessation of any process or operations or omissions of any kind.
2. Loss of Profit
This cover shall not indemnify: -
Increase in loss resulting from interference at the insured premises, by terrorists or other persons, with rebuilding, repairing or replacing the property or with the resumption or continuation of operation;
Increase in loss caused by the suspension, lapse, or cancellation of any lease, licence, contract, or order, unless such results directly from the insured interruption of business, and then the Company shall be liable for only such loss as affects the Insured's earnings during, and limited to, the period of indemnity covered under this Policy;
Increase in loss caused by the enforcement of any ordinance or law regulating the use, reconstruction, repair or demolition of any property insured hereunder;
The Insured's lack of sufficient capital for timely restoration or replacement of property lost destroyed or damaged;
Loss resulting from: a) Deliberate erasure, loss, distortion or corruption of information on computer systems or other records, programmes or software; b) Other erasure, loss, distortion or corruption of information on computer systems or other records, programmes or software unless caused by damage to the machine or apparatus in which the records are mounted;
Loss resulting from alterations, additions, improvements, the rectification of defects or faults or elimination of any deficiencies carried out after the physical;
Loss of market or any other consequential loss;
Loss as a result of physical or mental or bodily injury to any person;
Loss arising from Contingent Business Interruption Extension of Business Interruption/Loss of Profit Section under this policy, comprising of Customers and Suppliers premises, Prevention of Access and Public Utilities.
Is it a Compulsion or a Choice?
In India, terrorism insurance is an optional peril offered as an option to the insured. On payment of an additional premium at the rates the Pool has set, it is covered by endorsement. The Pool includes all non-life insurance providers in India. All members of the Pool contribute capacity, and 100% of the terrorism risk that any insurer in the insured classes underwrites in India is surrendered to the Pool.
In conclusion, the Indian Market Terrorism Risk Insurance Pool (IMTRIP) is a specialized insurance mechanism designed to provide coverage against losses and damages caused by acts of terrorism. It was established by the Indian government in collaboration with insurance companies operating in India. IMTRIP aims to mitigate the financial impact of terrorism on businesses and individuals, and to provide a stable and secure environment for economic growth. The pool offers a range of insurance covers, including property damage, business interruption, and personal accident, and it operates on a no-profit, no-loss basis. The success of IMTRIP is a testament to the power of public-private partnerships in addressing complex societal challenges.