M. A. Kharat_ProjectsMonitorM.A. Kharat,
Chairman and Managing Director,
United India Insurance Company

How much growth do you predict for the project insurance market?
In the current year, there is no growth in the project insurance market. But as and when projects are taken up, there will be growth. It will not be appropriate to assign a number to the growth unless we know what types of projects there are. The premium may differ from project to project; it is not the same. It is not like the premium increases proportionately to the project value.

What types of risks are ascertained before underwriting a project?
It depends on what type of project it is. For example, if it is a road or bridge project, then flooding occurs or bridge collapses, so these types of risks are associated with road projects.

In power sector projects, there are a whole lot of risks attached. Apart from ‘act of god peril’ like earthquake, storm and cyclone, there are risks like machinery breakdown or accidents.

Currently, the power sector is plagued by uncertainty over coal supply which creates additional risk while underwriting projects.
We are keen on the power sector but one needs to understand that issues like coal shortage in the power sector are not insurable risks. We insure damages occurring due to accidental external circumstances. Therefore, we don’t cover risks such as uncertainty of coal supplies.

Private players are trying to gain a foothold in the project insurance market. As a PSU do you think private companies will pose stiff competition?
The competition has increased since the day private players have come in. Nonetheless, it all depends on the capacity of the insurance company. All companies will not have the same capacity; it depends on the financial position of the company.

As far as PSUs are concerned, their financial position is very strong vis-à-vis private sector companies.

We really don’t foresee private sector companies taking a big chunk of the project insurance market. I am sure that going forward PSUs will lead the project insurance segment in India.

Since most infrastructure projects are implemented through central and state government agencies, do you think PSU insurers have an advantage over private companies?
It is not that PSUs have advantage vis-à-vis private companies. All project implementing agencies invite tenders and whoever gives the lowest price gets selected. Therefore, the L1 quote is selected and no specific company has an undue advantage.

What is UII’s long-term strategy in project insurance segment?
Currently, we are the leaders in the project insurance market across India. We have 19.91 per cent market-share in the general insurance market while in the project insurance market, we are leaders compared to all the other companies.


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