Insurers cautious on Indian war insurance as inquiries escalate

By Navneeta Nandan

May 27 - (The Insurer) - Inquiries for war on land cover have increased in the Indian subcontinent after the escalation of tensions between India and Pakistan in April, although insurers’ approach to providing this cover remains cautious, multiple senior market sources told The Insurer.

India and Pakistan saw a sharp deterioration in diplomatic relations triggered by the killing of 26 men in Indian-administered Kashmir on April 22. The tensions, which saw the worst fighting in nearly three decades between the neighbors, continued until a ceasefire was agreed on May 10.

Ed Winter, director of war and terror, Markel, and Robert James, senior political violence and terrorism underwriter at Allianz Commercial Asia, said they were not aware of any losses in the market from the conflict.

Sandeep Dadia, CEO and country head, Lockton India said that there had been insured losses but that these were limited to small houses and some local units.

However, multiple sources said the conflict has triggered an increase in the demand for war on land cover in the Indian market.

Gurdeep Singh Batra, executive vice president of Indian insurance company Bajaj Allianz, said that 20% of his customers are inquiring around war coverage compared to almost nobody before the active tensions between the neighboring countries.

This sudden growth in inquiries principally arose from the western border states of India like Gujarat, Rajasthan, Punjab and Himachal Pradesh, Batra added.

Deepika Mathur, managing director of global broker Markel’s India business, said that very few of her clients invest in war cover, but said the number of inquiries is “through the roof”.

Although demand has increased, insurers have shown some caution in providing war coverage in the region.

“We are cautious as the risk has heightened following the escalation. There have been downed fighter jets and airstrikes on both sides which can materially impact properties that get caught in the crossfire,” said James.

James said that some markets have excluded exposure in Jammu and Kashmir with appetite to provide war cover having dropped following the escalation.

Winter said that there is higher risk for war cover in territories in northern India closest to the Pakistan border, which has resulted in a higher price in these locations.

He said: “The pricing (is) very different (between) the south and the north because (the north) is where the threat is.”

Winter added that clients who want war covers are buying smaller limits than they ideally should buy.

Bajaj Allianz’s Batra said that coverage for war, invasion, or war-like situation is not covered in any property policy in India and is excluded under all standard commercial insurance policies. This war cover is available in the reinsurance market of Lloyd’s of London, he said.

James said that the upcoming renewal cycle will be critical to note how the insurers and the industry plan to navigate through the heightened tensions between India and Pakistan.