Financial Daily from THE HINDU group of publications
Monday, Apr 01, 2002

News
Features
Stocks
Port Info
Archives

Group Sites

Industry & Economy - Power
Money & Banking - General Insurance


Raichur thermal power station units 3, 4 -- ICICI-Lombard emerges lowest bidder for risk cover

C. Shivkumar

BANGALORE, March 31

GENERAL Insurer ICICI-Lombard (I-Lomb) has emerged as the lowest bidder for providing risk cover to Units Three and Four of the Raichur thermal power station (RTPS).

This is ICICI-Lombard's first major bid for non-motor risk cover contracts since it came into operation early this year. The quotes made by I-Lomb are inclusive of the five per cent provided for terrorist risk cover. Terrorist risk cover, however, has a cap of Rs 200 crore. In this case some of the discounts factored by I-Lomb were still under scrutiny, sources said.

The second lowest bidder for the projects is Bajaj Allianz, followed by the public sector insurer, Oriental Insurance Company Ltd (OICL). Last year Units Three and Four were with the public sector insurance companies. Sources said that I-Lomb had quoted bids of Rs 78 lakh and Rs 93 lakh for a sum insured of about Rs 900 crore for both of them together. The units have a capacity of 210 MW each. The risk cover offered is on a reinstatement value basis. This implies that compensation would be payable on a replacement -cost basis.

Government undertakings have in the past opted for market value method, where compensation is made after netting for depreciation. Insurance tariffs for reinstatement valuation is higher in view of the high underlying risks for the insurers.

The insurance tariffs, despite being the lowest, are considerably higher than what was quoted last year. This is in view of the loading for claims and the higher reinsurance rates in the markets. Reinsurance rates are currently in the region of about 0.75 to one per cent of the sum insured. Last year reinsurance tariffs averaged just 0.4 per cent for India.

Currently, the only other major project where ICICI-Lombard has provided risk cover is for the Jindal Thermal Company Ltd, where it is a co-insurer along with three other private sector companies. The lead insurer for this project is OICL.

But private sector insurers have been pitching aggressively for project insurance covers, in view of the low claims ratios. Claims ratios in project insurance is under 50 per cent and in the case of power sector even lower.

However, last year the Karnataka Power Corporation Ltd (KPCL), which operates all the six stations of the RTPS had made large claims, on account of fires in the stations.

Units One and Two have already gone to Bajaj Allianz. Bids for units Five and Six are also due to begin shortly and this is also expected to be substantially higher than last year in view of the changes in risk evaluation by the insurance markets. However, these hikes in insurance tariffs cannot be fully passed on to the power tariffs. This is because existing power tariff guidelines by the Ministry of Power restrict the pass-through to just 2.5 per cent of the operation and maintenance costs.

Send this article to Friends by E-Mail

Stories in this Section
Global airlines still keen on `Maharaja'


Deadline for zero revenue gap may be pushed back
CAG raps Govt for poor fiscal management
Q3 current account posts surplus after nine years
Petrol, diesel imports through IOC to continue
CF lamps: Ray of hope amid power crisis?
Chamber welcomes new tariff order
Raichur thermal power station units 3, 4 -- ICICI-Lombard emerges lowest bidder for risk cover
Staggered power cuts
Subsidy to SSIs on the decline
Farm exports freed; thrust to SEZs -- Maran gives Exim policy a friendly push
Bleak export scenario set to change: Maran
Simplified norms; specific packages
New initiatives to drive export growth
Salient features of the Exim policy 2002-07
No to global financial centre in SEZs
Extra revenue outgo on sops at Rs 1,000 cr -- Total outflow may top Rs 27,000 cr in 2002-03
`We want a critical mass of exports'
`Path-breaking policy, will boost exports'
Maran bullish on 1 pc target -- Package for services export coming
Offshore branches will lead to easy transactions: Ballabh
Exports to new markets to go up 15-30 pc
Textile industry upbeat on retention of schemes
`Maran's message is export or perish'
No incentives for States: GMCI
Comprehensive, says Cochin SEZ
Chambers hail Exim policy
`Boost for agri exports'
Growth-oriented policy, says FIEO
Liquor sector wants lower CVD move rolled back
Gem trade wary of diamond duty cut
Focus on cluster-based units -- Tirupur hosiery sector hails policy thrust
Solid motor for PSLV 3rd stage
ITI removed from sell-off list on `strategic' grounds
Four bidders for Nizam Sugars unit
ITDC divestment proceeds to be shared with States
Targeting self-help groups for rural development -- IDE offers drip irrigation systems for small far
Hyderabad Engagements
Competition for architects


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line