India Approves Rs 12,980-Crore Maritime Insurance Pool to Mitigate Shipping Risks Amid Strait of Hormuz Tensions

India Establishes Domestic Maritime Insurance Facility Amid Global Uncertainty

The Indian government has taken a significant step to mitigate the risks associated with maritime trade, particularly in the volatile Strait of Hormuz. Union Minister Ashwini Vaishnaw announced on Saturday that the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a proposal to create a domestic insurance pool, the Bharat Maritime Insurance Pool (BMI pool), with a sovereign guarantee of Rs 12,980 crore.

The BMI pool will provide continuous maritime insurance coverage for Indian trade, ensuring that vessels carrying cargo from any international origin to Indian ports and vice versa have access to affordable insurance, even when transiting volatile maritime corridors. The pool will be created to address the shortcomings in the global system of insurance and re-insurance, which currently has no coverage for serious and problematic situations.

According to Vaishnaw, the current geopolitical situation has highlighted the need for a domestic insurance facility that can provide coverage for hull and machinery, cargo, P&I, and war risks. The policies will be issued by insurers that are pool members, using the combined underwriting capacity of the pool, which would be around Rs 950 crore. The insurance period will be valid for 10 years and extendable up to 15 years.

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The establishment of the BMI pool comes at a critical time, with the Iran war increasing the risks to shipping and hiking up insurance costs for businesses. The domestic insurance facility will give India a domestic safety net for shipping risks, reducing dependence on foreign insurers. Currently, much of India's maritime liability cover comes from overseas P&I clubs; a domestic pool keeps risk management within India.

| Comparison of Insurance Costs | | --- | --- | | Current Insurance Costs (Rs crore) | Proposed Domestic Insurance Costs (Rs crore) | | 950 | 950 | | (Combined Underwriting Capacity of the Pool) | (Combined Underwriting Capacity of the Pool) |

The BMI pool is expected to improve India's energy imports by insuring tankers carrying crude oil, LNG, and other critical cargo. It will also help strengthen India's push to expand shipping, ports, and global trade presence by providing financial risk backing. The domestic insurance facility will ensure uninterrupted trade as Indian-linked ships can continue operating even if foreign insurers withdraw coverage during crises.