New General Insurance Corporation Directive

Following the latest directive from General Insurance Corporation of India (GIC), the national reinsurer, for increasing premiums for eight industrial categories, container freight station (CFS) as well as warehousing sectors have reacted strongly and both have demanded CFS and warehouses be kept out of the ambit of the higher fire-risk reinsurance premium cover. The increase in fire-risk insurance premium is estimated to be 9-10 times of the present premium amount for both CFS and warehousing sectors.

The CFS and warehousing sectors are planning to take their industry representation separately to GIC to present their respective cases. The reasoning of CFSs is mainly based on two aspects. CFSs firmly believe that they should be considered as ‘extension of the ports’, as they are also termed as ‘dry ports.’ Hence, they should be treated on par with ports. CFSs act like short transit points and activities are similar to those in ports. And, the ports are not covered under the latest GIC circular.

Even in case of warehousing sector – especially the structured ones with state-of-the-art set up and facilities – cater to just in time (JIT) concept to a large extent under ease of doing business. They too firmly believe that they also act like ‘short transit points’.

Both CFSs and warehouses handle hazardous cargo which comes under fire-risk insurance cover. The share is minuscule (4%-5%) compared to the volume of cargo of other categories being handled by them. Moreover, the hazardous cargos are properly segregated at the CFSs as standard operating procedure. As CFSs are categorised as customs cargo Service providers (CCSPs), they are continuously monitored by Customs and Maharashtra Pollution Control Board (MPCB). Hence, cargos are handled with extreme caution at the CFSs to comply with the norms.

Similarly, in structured warehouses, apart from internal control systems, they too are audited by MPCB. They are also are equipped with a robust fire-fighting system to address eventuality of an unforeseen incident.

So, both CFSs and warehousing sectors have raised questions on the rationale behind putting them under the purview of the circular.

If they are left with no option, they are planning to pass the additional cost to their clients.

The premium on manufacturing rubber goods, plastics, textiles, chemicals (below 32 degrees C flashpoint), besides transporter godowns/warehousing of a transporter, steel factories and thermal power plants have been increased based on an analysis of the burning-cost ratio by the Insurance Information Bureau (IIB). The rates are going up by three to nine times in some segments. The state-owned reinsurer, GIC Re, has asked general insurance companies to add the cost of management to the IIB-identified rates and accordingly provide quotations to their corporate clients if they want treaty arrangements with it.

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