India’s ₹4.97 billion (about ₹497 crore) insurance support scheme is designed to address a specific set of risks that have emerged for exporters as disruptions in West Asia push up freight, insurance costs and payment uncertainties.What has changed
Shipping routes through conflict-affected regions have seen a sharp rise in war-risk premiums and emergency surcharges. This has increased overall logistics costs and introduced delays and unpredictability in deliveries.
For many exporters, especially small and medium firms, these costs are difficult to pass on to buyers, tightening margins and straining cash flows.What the scheme doesThe government’s intervention focuses on providing insurance support for shipments moving through affected corridors. By partially offsetting elevated insurance costs, the scheme aims to keep exports viable and reduce the likelihood of order cancellations triggered by sudden cost spikes or heightened transit risks.Which risks are being addressed
Cost risk: Higher insurance premiums and freight charges
Transit risk: Delays, rerouting, or non-delivery of shipments
Financial risk: Payment delays and increased working capital pressure
Contract risk: সম্ভibility of order cancellations due to uncertainty
Why it matters for exportersExporters are currently dealing with a combination of rising upfront costs and delayed realisations. Insurance support can help manage part of this exposure, allowing firms to continue shipping without sharply revising prices or absorbing the full impact of higher risk premiums.Parallel measures under considerationIndustry inputs indicate that the response is not limited to the insurance subsidy.Balasundaram R, Head of Marine Insurance at Policybazaar for Business, said customs procedures have been streamlined for shipments that return to India after failing to reach their intended destinations, easing immediate logistical challenges.He added that discussions are underway on a broader risk-sharing framework, including a potential sovereign-backed insurance pool involving domestic insurers and reinsurers to cover high-risk routes.In addition, the government is engaging with the Export Credit Guarantee Corporation of India (ECGC) to explore mechanisms that can protect exporters against delayed payments and contract cancellations.What remains unclearDetails on how the insurance support will be operationalised, such as eligibility, extent of coverage and disbursal mechanisms, are yet to be announced. The structure and timeline of the proposed insurance pool and payment protection measures are also awaited.
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