Former regulator N. Rangachary, who is advising Oil and Natural Gas Corporation (ONGC) on squeezing a better deal from state-owned insurance giants, has asked chairman Subir Raha to enter the sector on his own. If not from May 11 this year when ONGC’s $14-billion insurance cover is up for renewal then from next time onwards. Rangachary’s input is bad news for the four incumbent players in the insurance sector. Rangachary has suggested that ONGC should float a fully-owned subsidiary dealing with in-house insurance needs. The proposal will be placed before the board shortly. He believes that the present payout of $39 million covering the company’s offshore installations can be brought down. Similar cuts can be made in the onshore policy. The two insurance covers have been separated following Raha’s move last year to distinguish onshore and offshore into separate accounting heads. Plus, overseas arm ONGC Videsh also needs cover on personnel as well as political risk. ONGC’s brass said they don’t have specialised staff on the subject, which is actually the reason why Rangachary was hired this year. The former regulator has now suggested that the oil giant should put together a dedicated team which can scour international trends and squeeze brokers and international re-insurers directly instead of letting state-owned insurance companies run the show.Also, ONGC has had a no-claim record for the last three years. Rangachary feels an in-house company can leverage this and threshold levels better. Sources said ONGC won’t upset the apple cart this year. But Rangachary has already squeezed a 20 per cent plus cut in the $39-million offshore cover for 2003-04. Having got there he now promises to negotiate with India’s 16 IRDA-authorised brokers rather than let the winning state-owned insurance company bring in its own broker and international re-insurer. Oil multinationals like Shell and British Petroleum have their own specialised risk management companies/insurance subsidiaries.When contacted, Raha confirmed the move and said, “we are exploring all possibilities”. However, he did not give any specific details.ONGC’s risk cover includes war and terrorism, apart from other operational risk factors. While the oil giant is mulling over the possibility of having its own insurance company, it is also simultaneously looking into the proposal of getting a personal insurance cover of Rs 5,000 crore for its board members, in order to protect them against various legal suits. The company secretary will also come under this cover. The policy is called the Directors and Officers Liability insurance policy which will give the company’s chairman a cover of Rs 3,000 crore while other board directors would be covered for Rs 2,000 crore. Logic being given for this cover is that leading foreign institutional investors would participate in the forthcoming public float of ONGC and will become the new shareholders of the company. As a result of this, ONGC’s directors and top officials could be made personally liable by these international shareholders.
