In a major step to safeguard India’s maritime trade, the Union Cabinet has approved the creation of a Bharat Maritime Insurance Pool with a sovereign guarantee of ₹12,980 crore.
The announcement was made by Ashwini Vaishnaw, highlighting the government’s proactive approach to address rising global uncertainties affecting the shipping sector.
Why This Move Is Important
The decision comes in response to the ongoing West Asia conflict, which has significantly increased risks in key global shipping routes such as:
- Strait of Hormuz
- Red Sea
These tensions have led to:
- Sharp rise in insurance premiums
- Reduced participation of global reinsurers
- Increased uncertainty in maritime trade
Key Features of the Insurance Pool
- Sovereign Guarantee: ₹12,980 crore
- Coverage for:
- India-flagged vessels
- India-controlled vessels
- Ships linked to Indian trade routes
Types of Risks Covered
- Hull and machinery
- Cargo
- Protection & Indemnity (P&I)
- War-related risks
This is crucial because standard marine insurance policies usually do not cover war risks.
Impact on Shipping and Trade
The new insurance pool aims to:
- Ensure continuous insurance availability
- Reduce dependence on foreign insurers
- Lower insurance costs for shipowners
- Support smooth functioning of trade routes
Rising Cost of War Risk Insurance
Due to geopolitical tensions:
- Premiums have risen from 0.02–0.05% to 1–3% of ship value
- In extreme cases, up to 7.5%
Example:
For a tanker worth ₹2,500 crore, even a 1% premium = ₹25 crore per voyage
This has significantly increased the cost of shipping.
Strategic Significance
- Strengthens India’s maritime resilience
- Supports exporters and shipping companies
- Complements existing schemes like export credit guarantees
- Enhances India’s energy and trade security
Conclusion
The creation of the Bharat Maritime Insurance Pool reflects India’s strategic response to global geopolitical risks. By providing war risk coverage and reducing insurance costs, the initiative will ensure uninterrupted maritime trade and strengthen India’s position in global supply chains.