Despite an increase of around 32% in its asset valuation ?from $5.89 billion to $21 billion currently?the Oil and Natural Gas Corporation (ONGC) has been successful in getting its $750 million offshore package insurance policy for 2008-09 renewed at almost the same premium, which was $29 million for 2007-08. ONGC is one of the biggest buyers of insurance in the world and said to be the largest in India.

While earlier ONGC was contemplating to increase the value of the policy to $850 million, considering that the value of its single largest platform?Mumbai High?was around $835 million. However, ONGC was advised against increasing the insurance limit by its lead insurer?United India Insurance Company (UIIC)?as only one platform of ONGC is valued above $800 million while all others are priced at around $600 million or below. Any increase in the insurance package limit would have impacted the premium.

UIIC has been the lead insurance company in case of ONGC?s offshore package policy for 2008-09 and Benfield along with K M Dastur was the re-insurance broking firm. Other overseas broking shortlisted for reinsuring ONGC?s offshore package insurance policy for 2008-09 included Marsh McLennan, AON and JLT.

ONGC has been able to bring down its offshore insurance spends over the years. As against $29.03 million in 2007-08, ONGC had paid $46.83 million in 2006-07. In fact sources said that even for 2008-09, ONGC had first agreed to pay a premium of around $34 million for the current fiscal and an internal committee of the company had even approved a gross premium of around $34 million for renewing the policy for 2008-09. However, the premium was subsequently reduced to $29 million.

ONGC?s offshore package policy gets re-insured in the offshore market, with the risk retention by Indian insurance market being in the range of 10-13% and the balance is insured in the international reinsurance market, predominantly at London. One of the Indian nationalized insurance companies is appointed as the lead insurer every year from amongst the four Indian nationalized insurance companies. The lead insurer in-turn approaches the global insurance market through re-insurance broking firms.

In fact, UIIC has been the lead insurer of ONGC?s offshore package policy since inception, except for policy years(s) 1997-98 and 2001-02, when Oriental Insurance Co Ltd and New Indian Assurance Co Ltd respectively were the lead insurers.

The offshore insurance policy package covers ONGC?s offshore production complexes, pipelines, rigs, specialized vessels, wells besides operational risks and third party liabilities. The policy provides coverage for a combined single limit of $750 million, with a deductible of $20 million in case of any one accident.

United India had settled a claim for Rs 1,700 crore to ONGC for the loss in the Bombay High North accident in July 2005 under the offshore package policy. The BHN accident caused a major fire, which totally destroyed the platform, while multipurpose support vessel (MSV) `Samudra Surkasha?, which sustained major damages, sank on August 2, 2005.

The heat and smoke of BHN fire partially affected other installations also including the interconnecting bridges of the MNW and BHF platforms and sub-sea pipelines. ONGC?s offshore properties damaged in the above accident were insured with United India under ONGC?s Offshore Package Insurance Policy. The claim settlement was facilitated by the reinsurance broker Jardine Lloyd Thompson, London, and supported by their Indian partner Heritage Insurance Brokers Pvt. Ltd.