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IRDAI caps value of surety insurance contracts at Rs 500 cr

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The Insurance Regulatory and Development Authority of India (IRDAI) has capped the quantum of surety insurance contracts for an insurer at 10 per cent gross premium written subject to a maximum of Rs 500 crore per year.

The IRDAI has also stipulated that the non-life insurers wanting to underwrite the surety insurance risks should have a solvency margin of 1.25.

The Authority on Monday issued the IRDAI (Surety Insurance Contracts) Guidelines 2022 laying down the norms for this line of business.

Non-life insurers are allowed to carry out this business from April 1 onwards.

“The norms will help regulate/develop Surety as a business in India which otherwise is an accepted norm in the western countries,” Vikash Khandelwal, CEO, Eqaro Guarantees said.

“However, it would have been ideal if the final norms had also provided for a specialist surety insurance company,” Khandelwal added.

The Mumbai-based Eqaro Guarantees is a surety solutions provider.

Presently IRDAI allows standalone health insurance companies.

According to Khandelwal, allowing the surety insurers to work alongside the banks and other financial institutions to share risk-related information and technical expertise will help foster a robust ecosystem and prevent contagion.

“The guidelines are also silent on the right of recourse available to a surety insurance company in the event of a default by the contractor. These are critical and may impede the creation of surety-related expertise and capacities and eventually deter insurers from writing this class of business,” he remarked.

There are three parties to this contract viz., Surety-the person who gives the guarantee; the person in respect of whose default the guarantee is given is called the Principal Debtor and Creditor- the person to whom the guarantee is given.

The other underwriting guidelines as per IRDAI are surety insurance contracts can be issued for infrastructure projects of government/private in all modes; the contract bonds may include Bid Bonds, Performance Bonds, Advance Payment Bonds and Retention Money; the insurers can also underwrite Customs or Tax Bonds and Court Bonds; limit of guarantee cannot exceed 30 per cent of the contract value; surety insurance can be issued for specific contracts alone; the insurer cannot issue any surety insurance contracts on behalf of its promoters/subsidiaries, groups, associates and related parties; the insurer shall not enter into alternate risk transfer mechanism; surety insurance contracts cannot cover financial guarantee; and surety insurance cannot be issued where the underlying assets/commitments are outside India.

Business

Pakistani rupee falls to yet another historic low against US dollar

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The Pakistani rupee continued to tumble against the US dollar, breaching yet another important threshold of 196 in the interbank market to hit its weakest level on Tuesday, media reports said.

Maintaining its downturn for the eighth successive working day, the Pakistani rupee was being traded at Rs 195.74 against the greenback surpassing its last low, Geo News reported.

A persistent delay in the receipt of the next tranche of $1 billion from the International Monetary Fund (IMF) is mounting pressure on the rupee.

The situation is likely to remain uncertain for the local currency, Commodities Director Adnan Agar said as the local unit fell below 196-mark against the greenback during the trading session on Tuesday.

“If the government decides to remove subsidies on petroleum products, the rupee will bounce back,” he said, adding that the local unit will remain within the range of 180-185.

Agar, however, added that if the government decided to dissolve the Assembly and move towards early elections, the situation for the already tumbling currency market will deteriorate.

Since the beginning of this fiscal year (July 1, 2021) to date, the rupee has collectively dropped by a massive 24.24 per cent (or Rs 38.2) compared to the previous fiscal year’s close at Rs 157.54.

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5G technology to contribute USD 450 billion to Indian economy: Narendra Modi

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Prime Minister Narendra Modi on Tuesday said 5G technology will contribute US Dollar 450 billion to the Indian economy.

Underscoring the role of the telecom sector in the progress of the country, he also said that by the end of this decade, the country will be able to launch 6G services of its own.

Addressing the silver jubilee celebrations of the Telecom Regulatory Authority of India (TRAI), Modi said: “It is estimated that in the coming time, 5G will contribute USD 450 bn to the Indian economy. This will not only accelerate internet speed but also boost development and employment.”

“By the end of this decade, we will be able to launch 6G services, our task force is working on it. Our efforts will help our startups to become global champions in the telecom sector and 5G technology,” he said.

He launched a 5G Test Bed, developed by a multi-institutes collaborative project that included a eight institutes led by IIT Madras.

“5G Test Bed is an important step towards the country’s self reliance on critical and modern technology in the telecom sector. The 5G technology is also going to bring positive changes in the governance of the country, ease of living and ease of doing business,” the Prime Minister said.

This facility will boost growth in every sector – agriculture, health, education, infrastructure and logistics, creating vast employment opportunities, the Prime Minister noted.

Referring to the situation prior to 2014, he said that the growth was slow and in last eight years, the investment has gone up one and half time more than what it used to be in 2014.

With the new initiatives taken by the government, the Prime Minister also said that the call and data rates in India are cheaper than other countries.

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Aborted Kerala Seaplane project to be turned into dam plane service

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 The ambitious sea plane project envisaged during the 2011-16 Oommen Chandy government that got aborted following serious objections from the fisher folk community appears to have taken a new shape with the Pinarayi Vijayan government deciding to turn it into a dam plane project.

If the Chandy government thought of landing the sea plane on water bodies in lakes and rivers, the Vijayan government has proposed the same but has turned the landing of such planes inside the catchment areas of numerous dams in the state.

Chandy’s project was shot down by inland fishermen who eke out a living fishing in lakes and rivers stating that their primary vocation of fishing might get affected because of frequent landing and take off by these sea planes.

According to sources, the same project of sea planes has taken a new shape and the proposed landing and takeoff is now proposed to take place in the catchment areas of the dams.

In Kerala, dams are the properties of the Kerala State Electricity Board and the Kerala Water Authority and so far there have been keen interests shown by about half-a-dozen companies.

If this project turns out to be a success, then the biggest gainer would be the tourism industry in the state as tourists can reach several prime destinations in the state by air, cutting a lot of travel time as roads in the state are congested.

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