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New India Assurance set to insure Kudankulam plant with global participation; sum assured of over Rs 43,000 crore

GIC Re, NIA in talks to sort out the difference in quotes with global reinsurers

Written by George Mathew | Mumbai |
Updated: March 3, 2022 4:21:38 pm
New India Assurance, Kudankulam, Kudankulam nuclear plant, Kudankulam nuclear power project, Nuclear Power Corporation of India Ltd, Business news, Indian express business news, Indian express, Indian express news, Current AffairsThe placement of Kudankulam insurance has to be completed soon, as the reinsurance market has shown a hardening tendency in view of the Russian invasion of Ukraine which has started impacting the reinsurance rates, industry officials said.

New India Assurance (NIA) will soon complete the placement of property cover for units three and four of Kudankulam Nuclear Power Plant (KKNPP), with a sum assured of over Rs 43,000 crore. The cover is likely to be executed with the participation of major global reinsurers, sources said.

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NIA, which has provided the property covers for the first two units of the plant with the participation of state-owned GIC Re, has already won the Nuclear Power Corporation of India Ltd (NPCIL) mandate for insuring two more units of the KKNPP after a competitive bidding last November.

The placement of Kudankulam insurance has to be completed soon, as the reinsurance market has shown a hardening tendency in view of the Russian invasion of Ukraine which has started impacting the reinsurance rates, industry officials said.

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GIC Re — which has already participated in reinsuring the first two units of KKNPP, not only in terms of mandatory 5 per cent obligatory and taken much larger share — is currently having discussion with NIA for deciding its share, if any, in the other two units. KKNPP is one of India’s largest nuclear plants, being set up by NPCIL.

GIC Re has quoted a higher price of Rs 177 crore for its participation, while NIA has managed a lower quote of Rs 160 crore from a set of international reinsurers located outside India. Going by existing reinsurance norms, in order of preference, NIA has to first approach GIC Re which has the first “right of refusal” for any reinsurance business in India. As phases one and two of the plant have remained claims-free, NIA — India’s largest insurer — has managed to get a cheaper reinsurance quote from international reinsurers.

As per current regulations, once GIC refuses fully or partly, NIA — following the order of preference — can approach foreign reinsurance branches (FRBs) in India, reinsurers who are present in GIFT City (presently only GIC Re) and lastly cross-border reinsurers registered with Irdai. A senior NIA official said, “Currently, senior officials of both GIC Re and NIA are discussing the placement of deal which will mutually benefit them and NPCIL. NIA is committed to comply with all reinsurance regulations and safeguarding the interest of NPCIL in terms the best reinsurance cost.”

Insurance covers for nuclear plants are purely reinsurance driven, like aviation insurance, where the primary insurer reinsures  over 90 per cent of the high value cover with large sum assured, and more than one global reinsurer.

Sources said this is done to ensure that in any case of mishaps, that can trigger large claims, financial compensations are easily mobilised from a clutch of large high net-worth reinsurers which would not be possible in the case of a limited number reinsurers.

NPCIL had mandated NIA among the domestic insurers, which had provided the cheapest bidding in terms of premium, after cancelling the first bidding in 2020. A nuclear plant has two covers: a property cover and a liability cover. The liability cover for a nuclear plant is always covered by the Nuclear Pool, formed by the general insurers and managed by state owned reinsurer GIC Re. While the ground-breaking ceremony for construction of units three and four was performed in February 2016, due to technology changes, inflation and insistence of the supplier and operator for additional liability insurance, construction cost of these additional units has already gone up.

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