Major Indian pharmaceutical exporters are considering the option of political insurance with their increasing presence in the overseas markets. India's pharmaceutical exports are growing at the rate of 20 per cent every year with addition of new markets. Some of the top Indian companies like Ranbaxy, Sun Pharma, Zydus Cadila and Wockhardt have recently acquired foreign companies.
As Indian export market moves into more politically vulnerable markets like Afghanistan, Pakistan, Africa, Latin America and Eastern European and CIS countries, chances of the companies' business affecting on account of unpredictable political scenario are strong. The answer to this growing dilemma is only political insurance, according to Aon Global, a US-based leading insurance brokerage house.
"Aon will arrange for a political insurance depending on the requirement of the Indian corporate. Political insurance becomes necessary for corporates entering new and politically unpredictable markets, where even a slight political indecision could cost millions of dollars to the company," said Kshitish Kala, vice president, Corporate Broking, Aon Global Insurance Services Pvt Ltd. Political insurance is a very new concept in the country. No insurance company in the country offer insurance coverage against international political crisis affecting businesses, he said. All major global insurance companies offer political insurance.
The Indian government order of late seventies to MNCs like Coca Cola and IBM to shut their operations in India is the best example of a situation entitled for insurance against political risk. Recent example of the US political representatives campaigning against outsourcing from countries like India is another example of a possible political risk.
Some of Indian pharmaceutical companies who have been a victim of political crisis include Shreya Life Sciences and Ajanta Pharma. Shreya's Zimbabwe-based plant had to be shut down after Mugabe (Zimbabwe's dictator) started committing atrocities against the foreigners and foreign companies in Zimbabwe. Similar is the situation in most of the African countries. Ajanta Pharma's joint ventures with the CIS countries did not take off due to political uncertainty.
However big the Russian market be, insurance Pundits still rate it to be politically less safe. Most of the South American nations including Columbia and Mexico are politically vulnerable.
Same is the case for Pakistan and Afghanistan. "Indian pharmaceutical companies would be considering increasing trade with Pakistan and setting up pharmaceutical units there. Having done that if some thing untoward like overthrowing of Gen. Musharraf happens and the new General freezes or restricts the trade between two countries, these companies would be in trouble. Here lies the importance of political insurance," said an industry observer. The same is the case with Afghanistan, he added.