Financial Daily from THE HINDU group of publications
Tuesday, Jan 18, 2005
Money & Banking - General Insurance
When tsunami struck, they had no cover
Tsunami-wrecked coastline littered with trawlers in Nagapattinam. - - C. Shivkumar
Nagapattinam , Jan.17
SELVAM, one of the affluent fishermen of Nagapattinam, has been reduced to penury. His deep-sea trawlers are damaged beyond repair and grounded by the Tsunami that struck on December 26, 2004.
He pointed to some vessels lying close to the Nagapattinam Kadarkarai railway station to this reporter and said, " This fleet are all mine. They are useless now." Asked whether any of the vessels were insured, he replied, " None ."
Only vessels that are bank financed are insured. As a result, the banks would be in a position to cover themselves against any write off of loans. But only about five per cent of the vessels are under hypothecation to the banks.
In fact, a large majority of the fishing vessels along Tamilnadu coast are uninsured. Fisher folk in Tamil Nadu seldom resort to bank finance for funding vessel purchases. Most of them still meet their funding requirements from unorganised moneylenders or through self help groups or savings cooperatives. In such methods of vessel funding, insurance is treated as expenditure.
And economies in the coastal districts are entirely driven by the fishing industry. Export earnings have not been good during the last few months. Many consignments were rejected during the last one-year. As a result, few fishermen earned surpluses to pay up insurance premiums.
Insurers are willing to help fishermen. But one public sector insurer asked, " When the vessels are uninsured, there is nothing we can do. Some terms can be liberalised where vessels are insured. " The presence of the private sector players has hardly helped in raising insurance coverage.
Besides, unlike the road transport industry, insurance for small sea-going vessels is not compulsory under Indian law.
Also, there is considerable ignorance among fisherfolk about the risk products available. Both business risks and assets could have been insured. This would have considerably alleviated their financial distress.
Many of the vessel owners have sought the intervention of the Ministry of Commerce and the Department of Fisheries for helping them in the face of such a tragedy.
Nobody here wanted doles or grants. What they are looking for is some financial assistance from banks on slightly concessional terms, to help them rebuild their lives.
Banks so far have not been forthcoming about large loans. This is partly because bankers' covenants are still not clear about making large advances in such calamities. Besides, bankers are not uncertain about the debt servicing capability of the fisherfolk given the large rejections of export shipments.
Moreover, domestic consumption of fish has also reduced during the last few days. This further raised the financial risks involved in funding fishermen for the public sector banks
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