India approves Rs 12,980 crore maritime insurance pool amid global risks

The Union Cabinet on Saturday approved the creation of a domestic insurance pool, the Bharat Maritime Insurance Pool (BMI pool), with a sovereign guarantee of Rs 12,980 crore to ensure continuous maritime insurance coverage, according to an official statement.

The government said the domestic insurance pool is aimed at addressing global volatility and geopolitical instability, while reducing external insurance dependency of Indian vessels.

“The pool covers all maritime risks like Hull and Machinery, Cargo, P&I and War risk. It covers vessels carrying cargo from any international origin to Indian ports and vice-versa, even when transiting volatile maritime corridors,” the statement said.

The pool is intended to ensure that Indian trade continues to have access to affordable insurance for vessels carrying cargo between international origins and Indian ports, including routes passing through volatile maritime corridors.

With increased global volatility and geopolitical instability, maritime trade has faced higher risks of losses for cargo and vessels. This has led to rising insurance costs and uncertainty over the continued availability of insurance cover.

The government noted that Indian vessels currently have high dependence on the International Group of Protection and Indemnity (IGP&I) Club for P&I insurance, which covers third-party liabilities such as oil pollution liability, wreck removal, cargo damage, crew injury and repatriation, and collision liabilities.

“There was a need for a domestic maritime risk covering pool to maintain sovereignty and continuity of trade in face of withdrawal of coverage due to sanctions or due to geopolitical tensions,” the statement said.

“In the above backdrop, the government has approved formation of ‘Bharat Maritime Insurance Pool’ (BMI pool) for Indian-flagged or controlled vessels or vessels destined to or starting from India, backed by a sovereign guarantee,” it added.

The policies will be issued by insurers that are members of the pool, using a combined underwriting capacity of around Rs 950 crore.

The government said the pool will help manage liability insurance locally, tailored to Indian shipping conditions and regulatory requirements, and will support the development of specialised marine underwriting, claims management and legal expertise within India.
A governing body constituted for the pool will oversee its formation and functioning.

The rationale for providing a sovereign guarantee is linked to strengthening self-reliance, sanctions resilience, and ensuring greater sovereign control.

Separately, the government also approved a 129.8-billion-rupee ($1.4 billion) guarantee for the maritime insurance pool, with Information and Broadcasting Minister Ashwini Vaishnaw stating that the pool will run for 10 years and can be extended by a further five years.

The move comes as wars and sanctions have prompted insurers to withdraw coverage, posing risks to trade flows.

Several major reinsurers, including India’s state-backed reinsurer GIC Re, have either withdrawn cover or raised premiums, leaving the industry with limited reinsurance support, Reuters reported earlier this month.

Reinsurers help insurers spread risk. Factors such as the Iran war and Western sanctions on Russia have contributed to reduced coverage in the sector.

The insurance pool will cover all maritime risks, including hull and machinery, cargo and war risk. Policies will be issued by member insurers using a combined underwriting capacity of about Rs 9.50 billion.

In a separate decision, the government said it has raised inflation-linked allowances by 2%, effective January 1.

Dearness allowance and dearness relief are government-mandated payments designed to offset inflation for employees and pensioners. These allowances are revised twice a year based on the consumer price index.

Government data showed India’s CPI rose to 3.40% year-on-year in March from 3.21% in February. Price pressures have increased due to higher cooking gas costs, although government tax cuts have shielded consumers from the full impact of higher global oil prices.

(With inputs from agencies)