Indian Market Terrorism Risk Insurance Pool

The Indian market set up its pool on April 1, 2002, when international reinsurers stopped following terrorism after September 11. Non-life insurers cede to it the terrorism exposure on their property and business interruption policies, along with the matching surcharge, and GIC Re, the state-owned reinsurer, runs it. There is no government guarantee behind it: capacity comes from accumulated premiums and members' commitments, with a per-location limit the market has raised several times, to about 2,000 crore rupees. IRDAI supervises the scheme without funding it. The test came from November 26 to 29, 2008, when a team of gunmen struck Mumbai: Chhatrapati Shivaji station, Leopold Cafe, Cama hospital, and above all the Taj Mahal Palace and Oberoi Trident hotels, held for dozens of hours. More than 160 dead. The pool settled the claims from its reserves, about 1,400 crore before the attack, for a loss IRDA put at 500 crore; the Taj Mahal Palace alone reported more than 114 crore in damage. The per-location limit, then 750 crore, was not reached. The market answered through price: rates rose by up to 54% on April 1, 2009, with the limit unchanged, and capacity moved to 1,000 and then 1,500 crore (2014) only later. For an international program underwriter, India is a country where local terrorism goes through the pool and the locally issued policy, and where political violence bought in London has to set its deductible and excess on the pool's limit, or the same tower ends up covered twice, or falls into a gap between two layers.