TERRORISM INSURANCE IN INDIA: NEED FOR LEGISLATION GOVERNING THE INDIAN MARKET TERRORISM RISK INSURANCE POOL

Abstract

1) At the wake of the November Attacks in Mumbai, India woke up to the reality of terrorism. While the 9/11 Attacks in the United States was a warning call to the world, many did not think the same would be a reality in India. While the entire nation stagnated due to the incident, one sector of business enterprise suddenly saw an increase in the demand for an insurance coverage not prior known to the Indian Insurance System: Terrorism Insurance. Terrorism now exists as a low frequency, high severity risk. Though the 26/11 Mumbai Attacks opened up the market for India, the Insurance Companies had capitalized on the fear or terror much before the Mumbai attacks. The Indian Terrorism Pool, set up in 2001 as an aftermath of the 9/11 attacks paid some large claims for the first time during the November Attacks. But to date terrorism insurance is taken only by big blue chips companies and their subsidiary. Negligible number of homes and small businesses are covered under the scheme. 2) Currently, general insurers provide property insurance from the Indian Market Terrorism Risk Insurance Pool regulated by the Insurance Regulatory and Development Authority. The pool was formed as an initiative by general insurers in April 2002 after terrorism cover was withdrawn by international re-insurers post the 9/11 attack in The United States of America. Insurers say premium for terrorism cover has been on the decline during the last few years as the pool has seen no major losses. The capacity of the pool has also swelled to ₹4,500 crore. 3) But the recent terror attacks in Paris and London and the constant infiltration of the enemies through our borders have sparked a fear which has resulted in the spike of terrorism insurance in India. Whilst the pool has been capitalizing on this the fear, there is no legislative mechanism to govern the pool. While countries such as the United States have a legislative document governing the same, this research paper aims to analyze whether a similar act is the need of the hour in India. 4) The author will carry out a doctrinal research to study the pros and cons of implementing such an Act, through analysis of relevant foreign legislations, reports and government schemes and aims to conduct a comparititive study with the Terrorism Risk Insurance Act of The United State of America. Finally, the paper will conclude with suggestions as to whether terrorism insurance act is a feasible solution to India’s under regulated terrorism insurance sector.