With insurance becoming scarce amid the West Asia crisis, the Cabinet on Saturday approved a $1.4-billion (Rs 12,980 crore) sovereign guarantee to back a new industry-led pool that will cover maritime risks, including hull and machinery, cargo, protection and indemnity (P&I), and war risk.
The ‘Bharat Maritime Insurance Pool’ will start with a corpus of about $100 million (Rs 950 crore), funded by contributions from the General Insurance Corporation of India (Rs 400 crore), public sector companies/ insurers (Rs 280 crore), and private players, Information and Broadcasting Minister Ashwini Vaishnaw said. The pool will provide coverage to India-flagged vessels, India-controlled ships, and those with India as their origin or destination. The cover will run for 10 years, extendable to 15.
“Even after the Strait of Hormuz was reopened, ships declined to operate there,” Vaishnaw said, pointing to persistent difficulties in securing reinsurance.
The government-backed mechanism is expected to cut maritime insurance costs by about 25% immediately, he said.
Rising geopolitical tensions have sharply increased risks to cargo and vessels, driving up premiums and disrupting the availability of cover. Indian shipping has also relied heavily on the International Group of P&I Clubs for third-party liabilities, including oil pollution, wreck removal, cargo damage, crew injuries, and collisions. The new pool aims to ensure continuity of coverage and reduce vulnerability to sanctions or geopolitical shocks.
Policies will be issued by member insurers using a combined underwriting capacity of around Rs 950 crore.
The pool will also help build domestic expertise in marine underwriting, claims management, and maritime law, tailored to Indian conditions.
Managed by the General Insurance Corporation, the pool will be overseen by a governing body. The sovereign guarantee is intended to strengthen self-reliance, improve sanctions resilience, and enhance sovereign control over critical insurance infrastructure.
Marine insurance premiums have surged amid Middle East tensions, with war risk rates rising between 200% and 1,000% in some cases. Threats to key routes such as the Strait of Hormuz and the Red Sea have led insurers to reprice risks and, at times, withdraw coverage, sharply increasing costs for shipping companies.