May 2, 2014
Insurance companies in India have raised premiums for hydropower projects across the country after flash floods last June in the northern state of Uttarakhand that led to huge claims.
Insurers like National Insurance, United India Insurance and Oriental Insurance have raised premium rates for such projects, reported Economic Times citing industry sources. Insurance contracts for most hydroelectric projects are renewed annually during the first quarter of the financial year.
“Last year’s Uttarakhand tragedy has completely changed the risk perception of hydropower plants for insurance companies. In response to tenders of power companies seeking quotation for reinsurance, insurers have asked for double or triple the earlier rates for power projects,” a senior power ministry official told Economic Times. The premium amount varies for each project depending upon factors like its location, size, company’s background and extent of risk coverage.
An executive with National Insurance said that his company was forced to hike premium rates because insuring hydroelectric projects has become riskier. “The projects get damaged every year during the monsoons. But damage claims during last two years have risen sharply. Last year’s Uttarakhand episode has compelled us to change our assessment.”
Uttarakhand sought INR138 billion (US$2.3 billion) from the central government for reconstruction and relief work as a result of the floods which killed around 5,700 people. Insurance losses were estimated at over INR 30 billion.