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ShareKolkata: A senior executive of a construction company in India was recently kidnapped and held for ransom for supposedly over a crore. Not only did the incident leave employees shaken, but also put a question mark over whether the project would take off at all.
A product sold by a reputed pharma and FMCG company had to be recalled as there were instances of accidental contamination.
An SME, which had shipped its products to a buyer in the US, had to face huge problems as the buyer defaulted because of the financial turmoil in late 2008.
An exporter almost went bust as his consignment was robbed mid-seas.
The 26/11 attacks had just happened and business chiefs and government officials were on the edge about the next move of terrorists.
Indian businesses and high networth individuals have never had it so risky. Even as business booms and global wealth makes its way into local coffers, the adversities have also been multiplying by the day.
And getting more complex, too! Indeed each of the cases cited above calls for a tailor-made insurance cover to soften the blow, if not obviate the risk altogether. Call these 'specialty covers', be they for kidnap & ransom, product recalls, political risk, marine piracy, terrorism or directors and officers (D&O) liability. These insurance products, niche plays for a long time, have lately been gaining ground in the country, as the risks mount.
"Risks have changed dramatically over the years. It is difficult to quantify, but we have been getting increasing enquiries from all the above in recent times. Initially, in the days when Indian companies were gong in for M&As, the need of specialty products were felt strongly," Uttara Vaid, executive director and chief operating officer, AON Global, which provides risk management and human capital consulting globally, told DNA Money on the sidelines of a seminar on trade credit and crisis management insurance.
"We predict that the next wave of absolutely required insurances will be in the crisis management areas like kidnap & ransom, both individual and corporate, terrorism and also trade credit and product recall insurance. All these are niche areas and we are bringing in most of these products to Indian customers. As brokers, we are well-equipped with the product profiles of most companies and needs of the individual and corporate clients on the other," Vaid said.
"The demand for specialty products is certainly on the rise," Rajiv Kumaraswamy, head, reinsurance and underwriting, ICICI Lombard General Insurance said. "For instance, in the proposed Company Bill, class action suits would also be permitted. So the need for D&O liability policies would increase as well as in the context of higher emphasis on corporate governance."
"We are number one in liability products across private and public sector companies. Specialty products' is a broader term. Within this there are a number of financial liability products," Gaurav Garg, managing director and CEO, Tata AIG General, said.
Incidentally, India ranks among the top five countries in kidnapping, after Mexico, Pakistan, Venezuela and Nigeria. Most direct insurance companies and insurance broking companies treat this cover, which provides for ransom, loss of ransom in transit, legal expenses and personal injury compensation, as top secret and are unwilling reveal details of clients or quantum of cover.
Product recall cover is another key specialty product in demand from pharma, food & beverage, cosmetics, sports, auto and auto parts companies, among others. "There is a spurt in enquiries for standalone recall policies and we are seeing enquiries from auto and the food sector," Vaid said.
As for terrorism, she said, "Awareness on terrorism risk has grown since 26/11 and I think there is a huge market for terrorism risk. If a company has exhausted its Indian capacity of Rs750 crore per location, the company needs reinsurance."
Trade credit insurance to cover financial and political risks in overseas markets has also seen demand spurt, in the aftermath of the financial meltdown. For long the fiefdom of the Export Credit Guarantee Corporation of India, the domain has lately expanded with the entry of a few new players.
According to Garg, during times of recession, the risks associated in doing trade increases and hence demand also increase. Also, post Satyam, there has been an increase in D&O liability products. Kidnap and ransom policies are also gaining prominence with threats by ultra groups in interior areas.
"Also, with a number of IPOs coming in the market, companies are opting for covers called public offerings securities insurance. Reps and warranties cover is also important for companies going in for merger and acquisition activities," said Garg
RK Kaul, general manager, National Insurance Company said, "We have all these products. Although volume-wise, the market is not so big, they will gain more popularity in times to come. Product recall is a popular product. But since all these specialty products are not conventional products, the need of a proper expertise to underwrite is crucial."
Somewhat ironically, the growing risk for businesses is music to the ears of the insurance providers. After all, these are customised products and command better premiums compared with the mass end. And while the market size is hard to glean from insurance companies, industry sources are unanimous the space has grown significantly in recent years and will keep growing.
