Insurance companies have raised the premium for hydropower plants across the country after last year’s flash floods in Uttarakhand that led to huge claims. Companies like National Insurance Co Ltd, United India Insurance Co Ltd and Oriental Insurance Co have raised premium rates multifold for hydroelectric projects, sources said.
Insurance companies have received huge damage claims from hydropower companies like NHPC and Jaiprakash Associates for power plants located in Uttarakhand after the floods, forcing them to revise the existing rates. Insurance contracts for most hydroelectric projects are renewed annually during the first quarter of a financial year.
“Last year’s Uttarakhand tragedy has completely changed the risk perception of hydro power plants for insurance companies. In response to tenders of power companies seeking quotation for re-insurance, insurers have asked for double or triple the earlier rates for power projects,” a senior power ministry official said.
NHDC, a joint venture of NHPC and Madhya Pradesh government, has received exorbitant quotations from insurance companies for its 1000-Mw Indira Sagar project in Madhya Pradesh with the lowest bid around 200 per cent higher than the last year.
An official in National Insurance Co said it was forced to hike premium rates as insuring hydroelectric projects have become riskier. “The projects get damaged every year during monsoons. But damage claims during last two years have risen sharply. Last year’s Uttarakhand episode has compelled us to change our assessment.”
He said the renewal premium has also increased, as no-claim discount was not available to many companies that claimed damages last year. The premium amount varies for each project depending upon factors like its location, size, company’s background and extent of risk coverage.
NHPC director finance A B L Srivastava said the company’s projects were due for insurance contract renewal in June. The company started insuring projects after Srivastava took over in 2008. NHPC incurred a loss of about Rs 300 crore at its 280-Mw Dhualiganga project in Uttarakhand due to the floods. The company recovered a major chunk of the loss through insurance claims.
