Marine Insurance & Export Credit Guarantee Corporation of India Ltd. (ECGC): Silent Protectors of India’s Foreign Trade.

 1. Executive Summary

• Trade by sea remains the backbone of India’s foreign commerce. To safeguard this, two key instruments—marine/transit insurance and export credit guarantee insurance (via ECGC)—function as indispensable risk mitigation tools.
• ECGC in FY 2024-25 supported exports of Rs. 8.55 lakh crore, up 17% year-on-year. (Devdiscourse)
• Marine insurance in India remains under-penetrated: market size Rs. 9,500 crore; it constitutes only about 5% of the non-life insurance market. (ICICI Lombard)
• While the existing framework provides strong protection, key gaps remain—especially for SMEs, under-insurance, emerging risks, and cost pressures.
• This brief proposes targeted interventions to enhance the ecosystem: increasing awareness, improving domestic capacity, digitalisation of processes, aligning with new risks (tariffs, geopolitical disruptions), and integrating these instruments with trade policy.

2. Strategic Context

• India’s export ecosystem has grown rapidly and is increasingly exposed to transit risks (physical damage/loss of cargo/vessel) and payment/credit risks (buyer default, political risk, tariff shocks).
• Marine insurance deals largely with the physical transit risk; ECGC cover addresses credit/payment risk for exporters and banks. Together they de-risk trade flows.
• In a volatile global environment—with rising tariffs (e.g., U.S. tariffs on Indian goods), shipping/piracy risks, and disruption of insurance markets (sanctions, war zones) — the protective role of these insurance tools becomes even more critical.
  • Example: Indian marine insurance segment flat at Rs. 5,091 crore in 2023-24; premium income may increase due to higher shipment values, but competitive pressures remain. (The Economic Times)
  • Example: ECGC’s enhanced cover scheme (90% cover for exporters with credit limit up to Rs. 50 crore) effective July 1, 2023. (The Economic Times)

3. Current Status & Performance

ECGC

• In FY 2024-25, ECGC supported exports of Rs. 8.55 lakh crore, up 17% from previous year. (Devdiscourse)
• It collected gross premiums of Rs. 1,366.53 crore in that year. (Policy Edge)
• It announced a capital infusion plan of Rs. 4,400 crore over 5 years to increase underwriting capacity (maximum liabilities) to Rs. 88,000 crore. (CAGPT)
• Digitisation of all procedures and simplified claim settlement up to Rs. 10 crore for exporters. (Policy Edge)
• Enhanced cover to 90% for banks’ export credit working capital up to Rs. 50 crore, lowering borrowing interest rates for exporters. (The Economic Times)

Marine / Transit Insurance

• Indian marine insurance market approx. Rs. 9,500 crore (at certain recent measure) but penetration remains low. (ICICI Lombard)
• Growth has been uneven; e.g., flat at Rs. 5,091 crore in 2023-24. (The Economic Times)
• Export-oriented policies form significant part of marine insurance business, but many exporters (especially SMEs) remain under-insured.
• External pressures: sanctions, war-zones (Russia-Ukraine), increase in “excluded territories” pools. (ETBFSI.com)

4. Strengths & Opportunities

• The dual protection (marine + credit insurance) enhances exporter and bank confidence, enabling trade expansion.
• ECGC enhancements (higher cover, digitalisation, cheaper borrowing) are positive for SME exporters and market diversification.
• With rising export targets and new trade agreements, insurance frameworks support risk appetite for new geographies.
• Growing awareness of compliance, security (e.g., supply-chain risks) may further drive uptake of marine insurance.

5. Key Challenges & Weaknesses

• Under-penetration: Many SMEs do not fully insure shipments, or remain unaware of ECGC cover benefits (marine insurance especially).
• Cost pressures: War-risk, piracy, geopolitical risk zones increase premiums; exporters may face higher landed cost, eroding competitiveness.
• Emerging risks not fully covered: Delays, resale/diversion of goods, tariffs, cyber risks in shipping are at margins of cover. ECGC has proposed to extend cover for non-delivery/resale. (The Economic Times)
• Dependence on external capacity: For marine insurance and P&I cover (Protection & Indemnity for vessels) India still relies on global players; sanctions or supply chain disruptions affect cover.
• Claims experience & infrastructure: Efficient claims processing, transparency of exclusions, speed of settlement are variable – smaller exporters may be disadvantaged.
• Mismatch between insurance cover and trade facilitation: While cover exists, exporters still face logistic delays, customs/port inefficiencies, which insurance cannot address alone.

6. Policy & Operational Recommendations

1. Awareness & Outreach:
   • Launch nationwide campaign (through export promotion councils, MSME forums) to educate exporters—especially SMEs—about marine insurance and ECGC covers.
   • Simplified guidance note, case studies of claims, benefits of cover.
2. SME-Friendly Processes:
   • Simplify marine insurance policy formats for small consignments; encourage “micro-insurance” (small value shipments).
   • ECGC: Extend fully digital onboarding and claim settlement, reduce documentation burden for SMEs.
3. Domestic Capacity Building:
   • Encourage Indian insurers/P&I clubs to develop domestic marine cover capacity; incentivise joint public-private players.
   • Government could seed a “National Marine Insurance Pool” for high-risk/war-zone routes to avoid cost spikes.
4. Risk Pricing & Subsidies:
   • For exporters to high-risk markets/routes, consider targeted subsidies or premium support (especially for new exporters) via ECGC/Marine cover.
   • Example: ECGC’s moratorium on rate hikes for certain crisis zones. (NDTV Profit)
5. Cover for Emerging Risks:
   • ECGC to formalise cover extensions for non-delivery, diversion, tariff risk, cyber risk in shipping.
   • Marine insurance industry to evolve products covering cyber/hacking, climate-related transit delays.
6. Integration with Trade Policy & Logistics:
   • Link insurance cover with export credit, logistics performance improvements, port facilitation.
   • Exporters using recognised logistic hubs, IT enabled ports, AEO (Authorized Economic Operator) statuses could get preferential premiums.
7. Data & Monitoring:
   • Establish a dashboard to track insurance uptake (marine and ECGC) by state/sector/SME status.
   • Monitor claims ratios, premium trends, regional cover gaps.
8. International Cooperation:
   • Collaborate with export credit agencies of partner markets for mutual recognition of covers, especially in newer markets (Africa, Latin America).
   • Coordinate marine insurance frameworks with shipping risk mapping (piracy zones, war risk) and provide exporters routing advice accordingly.

7. Implementation Timeline (Suggested)

8. Conclusion

Marine insurance and ECGC export-credit cover are critical but often invisible fortifications that enable India’s exporters and trade financiers to engage confidently in global commerce. With the external environment becoming more uncertain—geopolitics, tariffs, shipping disruptions—the need to reinforce these tools is greater than ever.
By addressing under-penetration, extending cover to emerging risks, building domestic capacity, and integrating insurance with trade facilitation and logistics improvements, India can strengthen its trade resilience and competitiveness.
If well-implemented, the proposed policy actions will ensure that these “silent protectors” become proactive enablers of export-led growth.

Annexure - 1

Part I: Supportive Analysis – How Marine Insurance & ECGC Protect India’s Foreign Trade

Marine Insurance: The First Line of Defence

• Marine insurance provides exporters, importers, ship-owners and logistics providers in India with protection against losses of cargo, vessels or freight, due to perils of the sea (storms, sinking, grounding) or human/other risks (theft, piracy, loading/unloading damage). (TATA AIG)
• For Indian exporters and importers, marine insurance is especially important because India is a major trading nation: cargo must traverse long sea routes, encounter multiple transshipment nodes, changing weather, and sometimes high risk of piracy or war-zones (e.g., Red Sea, Persian Gulf). Articles note that “shipping goods across oceans is fraught with risks … Marine insurance helps mitigate.” (ThePrint)
• Marine insurance also helps build credibility in trade contracts: many international buyers/sellers require proof of marine insurance, banks require insurance before financing, and ports or shipping lines sometimes demand coverage. (TATA AIG)
• In the Indian context, data show the marine insurance market is growing (though still small relative to the overall insurance market). For example: “India’s Marine Insurance market roughly translates to Rs 9,500 crores … export policies contributed to the second highest number of written policies.” (ICICI Lombard)
• In short: marine insurance underpins risk management, enabling Indian traders to engage in global commerce with more confidence, thereby supporting trade growth and continuity.

ECGC: Credit Insurance and Export Risk Cover

• ECGC Ltd (Export Credit Guarantee Corporation of India) is a government-owned export promotion organisation that provides export credit insurance (i.e., covers exporters and banks against payment default risk from overseas buyers, both commercial and political risks). For example: “ECGC has around 85% of the export credit insurance market share in India… in 2020-21 ECGC-supported exports were Rs. 6.02 lakh crore, about 28% of India’s merchandise exports.” (CAGPT)
• Recent policy: ECGC raised cover to 90% for exporters with credit limit up to Rs 50 crore from 1 July 2023 (previously cover lesser). (The Economic Times)
• ECGC helps banks by giving them more comfort so that exporters get favourable interest rates (“AA” rating of accounts) when cover is high. (The Economic Times)
• The government has directed ECGC to maintain a moratorium on insurance rate increases for exporters in certain crisis contexts (e.g., Red Sea crisis) so that cost of cover doesn’t become a barrier to trade. (eca-watch.org)
• Thus ECGC acts as a silent protector: by providing risk cover for payment default (which is a major barrier to exports), it enables Indian companies (especially smaller ones) to venture into new markets, accept longer credit terms, and compete more confidently.

Combined Impact: Marine Insurance + ECGC = Strengthening Trade Resilience

• When marine insurance covers cargo/vessel risk and ECGC covers export payment and credit risk, the two together mitigate the main dimensions of international trade risk—physical transit risk and buyer/credit risk. This dual insurance environment strengthens India’s trade infrastructure.
• They contribute to trade facilitation: lower risk enables more banks to lend, more exporters to ship goods, perhaps incurring lower insurance premiums (provided risk remains manageable).
• They enhance India’s ability to participate in global supply chains: exporters face less risk of catastrophic loss or non-payment, so can commit to large orders, enter newer geographies, and scale up.
• For ship-owners and logistics operators: marine insurance ensures vessel/hull/freight cover, and by enabling cargo to move, they can operate with greater confidence and at scale, supporting India’s position as a maritime trading nation.

Part II: Critical Analysis – Limitations, Challenges, and Areas for Improvement

Marine Insurance: Gaps and Challenges

• Although marine insurance is essential, the penetration in India is relatively small: the marine/transit insurance market constitutes only about 5% of India’s overall insurance market, according to some estimates. (ICICI Lombard)
• Awareness, especially among small and medium exporters/importers, is low. Many SMEs may under-insure or not purchase optimal marine insurance policies. (BimaKavach)
• Challenges in infrastructure and regulatory clarity: many ports, shipping routes in India (and globally) still have outdated infrastructure; regulatory frameworks across cargo, shipping, insurance can be complex and burdensome. (BimaKavach)
• Policy exclusions: Standard marine insurance policies may exclude war, strikes, riots, delays, improper packaging etc. For exporters/importers, when incidents fall under exclusions, the risk still materializes. (TATA AIG)
• Cost pressures: In high-risk zones (e.g., Persian Gulf, Red Sea), war risk and premiums surge, as insurance markets tighten. For example: “Risky Strait of Hormuz: Marine insurance costs surge.” (The Times of India)
• Dependence on international insurance/P&I clubs: India still relies on global entities for certain liability cover (third-party, environmental) and is thus exposed to external market restrictions or sanctions. (As one Reddit mention suggests India may consider its own P&I entity). (Reddit)

ECGC: Strengths, but Also Constraints

• While ECGC’s expansion of cover and bank linking is positive, the coverage is still limited in some respects: exporters with smaller credit limits now get 90% cover—but larger exporters may still face constraints, and many banks/exporters may not yet access such benefits.
• Rate setting and risk: The government’s directive to ECGC to maintain moratorium on insurance rate increases (e.g., in Red Sea crisis) is supportive but may erode ECGC’s ability to price risk appropriately and build reserves for large default events. (The Economic Times)
• Exposure to international political risk: For Indian exporters financed in foreign currency or dealing with risky markets, ECGC cover may not always be sufficient; if a large geopolitical event causes multiple defaults, ECGC’s liability could increase sharply.
• Export diversification and risk concentration: Many Indian exports are concentrated in certain markets/products; ECGC scheme alone cannot offset structural trade risk (e.g., global demand shock).
• The interplay between marine insurance (physical risk) and credit insurance (payment risk) is not always seamless in practice: an insurer may cover cargo loss, but if payment default occurs due to buyer’s country risk, gap remains—coordination and claims processing can be complex.

Strategic and Structural Issues for India’s Trade Insurance Ecosystem

• Covering high-risk trade routes: With increasing geopolitical tensions (Red Sea, Persian Gulf, piracy zones), marine insurance and credit insurance costs escalate, making Indian trade less competitive compared to other nations with cheaper insurance/cover.
• Domestic capacity building: India still relies to some extent on global insurers/P&I clubs; building domestic marine insurance and P&I capacity would reduce vulnerabilities to international sanctions, market bottlenecks.
• SME inclusion: Many small exporters may not access marine insurance or ECGC covers due to lack of awareness, paperwork, cost—limiting the benefit of these protective mechanisms for inclusive trade growth.
• Claims settlement efficiency: Insurance is only as good as its claims processing. If delays, disputes or exclusions hamper claims, the perceived benefit to exporters/importers falls. Regulatory improvement and transparency are needed.
• Risk-priced trade: If Indian exporters face higher insurance premiums due to riskier markets/routes, it could reduce competitiveness unless costs are managed or subsidies provided.
• Holistic risk management: Marine insurance + credit insurance cover major risks, but other risks remain (logistics delays, customs/regulation, supply chain disruptions). India’s trade policy must integrate insurance cover with broader risk mitigation (trade finance, supply chain resilience, alternate routes).

Part III: Balanced Conclusion and Key Recommendations

Key Recommendations

1. Expand Awareness and Inclusion – Conduct outreach campaigns to SMEs, trade associations, and logistics firms about marine insurance and ECGC cover. Simplify application and claims procedures to broaden participation.
2. Develop Domestic Marine / P&I Capacity – Encourage domestic insurers or a “India P&I Club” to reduce dependence on foreign entities, manage costs, and insulate from sanctions/market disruptions.
3. Price Risk Appropriately Yet Affordably – While the government’s moratorium on rate hikes is helpful in the short term, ECGC and marine insurers must ensure pricing reflects risks to maintain sustainability and avoid future large losses.
4. Integrate Insurance with Trade Facilitation – Link marine insurance and ECGC cover to ease in trade finance, logistic pipelines, trade routes diversification and supply chain resilience. For instance, offer premium incentives for exporters using safer routes or shipping modes.
5. Monitor and Adapt to Emerging Risks – Climate change, cyber threats in shipping, piracy resurgence, geopolitical chokepoints—all these elevate the risk profile. Insurance and cover frameworks must evolve accordingly (e.g., add war risk, cyber cover extensions).
6. Improve Claims Transparency and Efficiency – Streamline claim settlements, enforce regulatory timelines, provide transparency on exclusion clauses, and improve digital platforms for claim processing.
7. Coordinate Internationally – In a global trade environment, India should coordinate with international insurers, export credit agencies of partner nations, to ensure cross-border cover, mutual recognition and management of large risks.

Conclusion

Marine insurance and ECGC are indeed silent protectors of India’s foreign trade: they allow cargo to move across seas with less risk, payments to be made with greater confidence, and exporters to operate globally without excessive fear of loss or default. Without these mechanisms, many Indian traders—especially smaller ones—would find global commerce far riskier and costlier.

However, the protection is not complete. There are coverage gaps, cost pressures, structural constraints, and evolving risk landscapes (geopolitical, cybersecurity, climate change) that challenge the effectiveness of these tools. To fully realise their protective potential, India needs to strengthen the ecosystem around them.

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