Insurers double premium for HMEL refinery after June fire

MUMBAI: Insurers led by New India Assurance have more than doubled the premium charged to HPCL Mittal Energy (HMEL) after a major fire broke out at its refinery in June that led to a significant payout by insurers.

HMEL, a joint venture between government-owned HPCL and LN Mittal, has agreed to pay Rs 89 crore premium as against of Rs 40 crore paid last year for the 9 mmta Guru Gobind Singh refinery in Bathinda, Punjab. The insurance cover was renewed last week, sources said.

Officials from New India Assurance declined to comment on the development. In an email response, HMEL said: “HMEL undertakes its insurance to mitigate its risks and as best suited to protect its interests. As a matter of policy, HMEL does not comment on commercial and associated matters.“ The company has taken insurance cover for probable maximum loss (PML) of Rs 8,000 crore against Rs 7,000 crore earlier. This means that even as the cost of the refinery is pegged at Rs 19,600 crore, the maximum cover that insurers will pay, in case of a disaster is Rs 8,000 crore.

Also, as per the clause of the contract, the policy covers business interruption over 45 days against 30 days earlier. This means HMEL can make a claim for business interruption only if the business is interrupted for 45 days. Business interruption insurance covers loss of income that the company suffers after shutting plants or facilities due to a disaster.

New India Assurance has a share of 77% in the policy, followed by SBI General at 11% and HDFC Ergo at 5%. The remaining is with National Insurance and United India Insurance. The company has taken a cover of Rs 4,600 crore for material damage and Rs 4,500 crore for business interruption.