Most post-Mumbai attack stories regard the alleged involvement of Pakistan. Other stories look at the impact on Mumbai’s economy. One story that won’t get much news coverage is the financial troubles to the famous Taj and Oberoi hotels. Through informal sources, I understand that the hotels are not only going to be shuttered for another year, but may be unable to collect insurance payments for the damage caused by the attacks.
I’ve previously written about war insurance for transnational ships. In similar forms this is known as risk insurance or even terror insurance, depending on the policy and type of coverage. These insurance policies cover ships, businesses, resorts, infrastructure projects, and even hotels in the event of catastrophic disaster. Problem is, there are reports coming out that the Taj and Oberoi hotels may have trouble getting insurance proceeds on some of the damage from their terror insurance policies. Why? The terror insurance policy states that damages that occurred while preventing terror attacks — be it by the state or any private agency — will not attract insurance cover. That includes damage resulting from controlling, preventing, suppressing or in any way relating to action taken in respect to any act of terrorism.
Started by who?
The insurers may contend that since the NSG commandos and fire brigade damaged the structure and other assets of the hotels in trying to get the terrorists and hostages out, these losses will be excluded from compensation claims. Depending on how aggressive the insurance companies push, all damage from the recent attacks may not be subject to insurance protection. The affect of this may have repercussions across the globe, and will almost certainly change the way hotels act towards their insurance coverage.
There are some pretty classless reports from the Hindustan Times stating that the terror attacks will benefit other hotels in Mumbai, because the expected closure of the Taj and Oberoi-Trident hotels for at least a year will remove 1,407 hotel rooms from inventory. This is ridiculous — the decline in visitation in Mumbai as a fall out from these attacks will be a lot more than 1,407 hotel rooms being taken out of circulation.