MUMBAI: GIC Re has provided reinsurance support to Reliance Industries' refinery and petrochemical plants at Jamnagar and Hazira in Gujarat. The mega risk policy of Rs 2 lakh crore is shared with 10 insurance companies, said two people familiar with the matter. Reliance Industries has paid a premium of Rs 625 crore for the cover. New India Assurance is in the lead, with the support of nine other insurance companies in the mega risk policy.

The refinery has the highest asset value at a single location in the world, and is also one of the largest refining complexes, with an aggregate capacity of 1.24 million barrels of oil per day. The policy has come into force from December 31, 2017, and about half the risk is placed in the international reinsurance market.

"Such risks cannot be absorbed by any single insurance company or even a single reinsurance company and that is where such risks are shared among a number of reinsurers globally," said a source aware of the development. GIC Re executives declined to comment.

Usually, one reinsurer, known as the leader, decides the terms of such covers. Other reinsurers then adopt the terms decided by the leader and write the risk. GIC Re is also providing significant support to other large players in the oil and petroleum sector, such as ONGC, Bharat Petroleum, Mangalore Refinery, Indian Oil and Cairn Energy. This practice also applies to infrastructure, airlines, oil and energy risk, exposures and agriculture insurance, or any exposure that goes beyond the balance sheet strength of an insurer.

Insurers mostly find themselves short of required financial strength to write such risks on their own.