Middle East conflict impact on India: The government is looking at the creation of a specialised fund to assist insurers offering war-risk coverage for ships operating on routes to and from India through conflict-affected waters in West Asia. Ongoing disruptions linked to the Iran conflict have unsettled trade movements, while global reinsurers have withdrawn from the region, making cargo transport both more expensive and harder to insure.Under a proposal being reviewed by the finance ministry, domestic insurers could be enabled to provide cover for vessels navigating high-risk areas such as the Strait of Hormuz, supported by a government-backed reinsurance mechanism designed to absorb potential losses, sources told ET.“We are examining if a fund can be created as reinsurance is not available in the region,” a government official said. The proposed arrangement would effectively act as a backstop, helping insurers secure reinsurance support at a time when international players are staying away.An industry executive noted that the structure could mirror the Marine Cargo Excluded Territories Pool introduced in 2022 following the Russia-Ukraine conflict and related sanctions.This pool, overseen by the state-run General Insurance Corporation of India (GIC Re), offers insurance coverage for marine cargo shipments of fertilisers and other goods originating from designated “excluded territories,” including Belarus, Ukraine and Russia.Such shipments are typically excluded from coverage by global insurers due to war-related risks and international sanctions. The existing pool comprises 21 members and provides a capacity of ₹484 crore per shipment.Under the current framework, GIC Re, acting as the pool manager, works with an underwriting committee to approve coverage for additional commodities when required. It accounts for the largest share of capacity at 51.6 percent and receives a 2.5 percent management commission on the original gross premium after adjusting for obligatory cessions.According to a government official, multiple options are under consideration, with any decision on establishing such a facility likely to be taken only after the Strait of Hormuz route reopens. The final decision regarding its structure, size, and institutional placement will depend on these developments.Another person familiar with the matter said the proposed pool could be housed within state-run insurers led by GIC Re, with an estimated corpus of around ₹1,000 crore.The proposed mechanism may also extend coverage to crude oil shipments moving through the Strait of Hormuz, in addition to other cargo, the person added. “This is being discussed so as to ensure the continuity of cover for India-bound cargo, as most global insurers have withdrawn the cover,” the person said.Industry stakeholders, including exporters and shipping companies, have in the past advocated the creation of such a facility.
