A parliamentary panel is set to suggest policy measures for the insurance sector to equip it to deal with the impact of natural calamities on large infrastructure projects, people familiar with the matter told.
The standing committee on finance-headed by former minister of state for finance Jayant Sinha has considered issues around reinsurance following complications in insurance claims related to the Teesta Stage III Hydropower project in Sikkim that was washed away by a glacial lake outburst.
The power project, which was completely washed down by a glacial lake outburst flood, was insured for Rs. 11,400 crore by a consortium of insurers, including a public sector entity, but reinsurers capped the payout at Rs. 500 crore.
They cited the contract that provided compensation would be limited to Rs. 500 crore in the event of glacial lake outburst flood (GLOF). Policymakers in the government are worried that this could pose a serious issue for large infrastructure projects and other hydropower projects. Insurance premium for infra projects have already gone up.
“We have to come up with policy solutions for such situations,” said one of the persons, pointing out that insurance companies did not have large capital reserves and could not price in such risks. As per a recent industry report, around 498 catastrophic claims are outstanding amounting to Rs. 1,640 crore.
