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ONGC bargains 12% discount on insurance premium

New Delhi: In spite of hardening oil and gas prices, flagship explorer ONGC will pay 12% less annual premium for insuring its offshore assets, an indication of trust reposed by overseas re-insurers in the state-run company’s safety and operational policies.

According to sources, ONGC will pay a little less than $13 million as insurance premium for the 2018-2020 period even though the value of its assets has increased by over 14% from around $35 billion to $40 billion for the current policy, sources said.

A statement by GIC Re, the largest reinsurer in India, on Tuesday said it has emerged as the winner in ONGC’s international bidding for giving the insurance mandate. It did not divulge details of the premium amount.

Since no single insurer in India has the capacity to bear the brunt of such large insurance policies, such packages are reinsured with multiple overseas insurers to spread the financial risk. The premium in such cases is decided by a favourable assessment of the insured company’s safety policies and appetite for such risks in the global market.

In the latest instance, ONGC’s premium negotiations were additionally helped by the fact that it had not made any insurance claim – commonly known as no-claim bonus – in the last two years. Another factor that contributed is the adoption of global risk management practices, providing a comfort level to reinsurers.

ONGC has the largest insurable assets in India and has been beating down insurance premiums since last several years in line with improvements in its safety policies. In 2015-16, the company had renewed its policy for $20 million, bargaining a discount of 35%.