"There is now heavy pressure on the government to withdraw this clause. If the government withdraws the clause, then the companies will get the full compensation amount. But it seems unlikely that they will withdraw the clause as the total corpus is only Rs 1,200 crore (Rs 12 billion)," says Parimal Shah.
A circular endorsed by the insurance tariff advisory committee, states, "The warranty also excludes loss or damage, cost or expenses of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to action taken in respect of any act of terrorism."
Currently, terrorism insurance compensation per location is capped at Rs 700 crore (Rs 7 billion). If the losses per location are not capped, there is no way to offer compensation in the event of a huge calamity where losses can be higher than the total amount in the compensation corpus.
Image: Firefighters attend to a fire as it burns at the Taj Mahal Palace & Tower Hotel following an armed siege on November 29, 2008 in Mumbai. | Photograph: Uriel Sinai/Getty Images
Also read: Milestones mark Chidambaram's tenure as FM
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