The Essar Group and a host of other corporate houses are seeking risk cover to protect themselves against price volatilities and disruption in fuel supplies.
"It is important to protect losses and exposure to price and other volatilities because these factors can severely affect the bottomline," said Essar Group head and vice-president (corporate risk and insurance management) Dinyar M Jivaasha.
Insurance companies have also received enquiries from some leading corporate houses and refineries for war risk cover, which is not granted on land risks.
Following the terrorist attacks in the US on September 11, 2001, Reliance Petroleum Ltd and Tata Power were among the first Indian corporates to seek war cover for land risks. However, since these were priced too high, the companies declined the cover.
The turmoil in international politics caused by the war and its implication for the domestic oil industry are forcing refineries and power producers to scout for competitive insurance rates to cover advance losses, with special emphasis on suppliers' extension.
"We have received a number of enquiries from domestic refineries importing crude from the Gulf. Any disruption in supply or hike in fuel charges will affect their bottomline," said a private insurance official.
The international reinsurance market is offering this coverage, which takes into account volatility in fuel prices and supplies.
However, these covers are priced exorbitantly. Said Jivaasha, "We are looking for an affordable cover and have sought the support of the insurance market for cover at more competitive rates."
Companies have requested insurers to levy an additional war risk premium on existing loss covers. This could take care of any mishaps in fuel supply or prices that would otherwise impact their bottomline.
"Since crude is imported from West Asia and the international reinsurance market has raised premium rates on cargo, there is a strong likelihood of disruption in fuel supplies and a rise in prices. This will hit our balance sheet," said an official at a private power company.