New war insurance to hit Indian shipping/oil companies

10 October 2001 09:43  [Source: ICIS news]

SINGAPORE (CNI)--Indian oil companies are expected to see costs rise by at least Rs50m ($1m Euro1.1m) this month following a decision by state-owned insurance companies to impose an additional war premium on shipping companies following the outbreak of hostilities in Afghanistan, oil industry sources told CNI Wednesday.

The insurance companies will impose a special war surcharge of 0.05% on the hull and machinery value (HMV) of vessels operating in Middle Eastern and South Asian waters from 20 October - in addition to the 0.08% they already levy for basic war risk.

One oil industry source said that the shipping companies are likely to pass the additional cost on to major refiners such as Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp. These government-run companies are likely to absorb the added costs, particularly since the pricing mechanism for essential oil products such as diesel and kerosene are controlled by the government.

The new insurance premiums will apply in 18 potential war zones listed by overseas underwriters. They include the Suez Canal, the Persian and Arabian Gulfs, the Gulf of Burma, Egypt, Israel, Lebanon, Angola, the Red Sea, Pakistan and Sri Lanka. Vessels moving from the Middle East to India have no option but to go through these exclusion zones.

By: Staff Reporter
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