Insurance brokers are of the opinion that insurers are themselves hesitant to provide a cover for insolvency professionals as they are individuals
As the Insolvency and Bankruptcy Code (IBC) comes into force this August, insolvency professionals are now rushing to buy insurance for themselves, as per a LiveMint report.
But there's one roadblock. General insurers in the country presently do not offer insurance cover for an insolvency practitioner.
“Currently, there is no personal indemnity cover for me. But if I become an Insolvency Professional Entity, or IPE, then that IPE will be covered under professional indemnity. We are, therefore, working on forming an IPE so that we come under the umbrella and get the insurance,” said Dinkar Venkatasubramanian, an insolvency professional at EY in a LiveMint report.
Indemnity insurance is a policy designed to protect professionals and business owners when they are found to be at fault for a specific event such as misjudgement. Mostly, these end up being availed by doctors, professionals, engineers lawyers and chartered accountants.
What are the options before the industry?
Right now, things can go two ways- one is to incorporate the insolvency practitioner’s liability as part of existing plans. The other is to create a new product, which again implies getting stuck in official processes of approvals and so on.
The insurance industry is seizing an opportunity in midst of all this as over 100,000 cases will be tried under IBC, which may lead to a rise in insolvency practitioners as well.
Currently there are 100 cases being tried and Reserve Bank of India has identified 500 large stressed accounts that could go under the IBC scanner if banks fail to roll out a resolution in the next six months.
Insurance brokers are of the opinion that insurers are themselves hesitant to provide a cover for insolvency professionals as they are individuals.
In addition to that, low deductibles are being proposed.
Deductibles imply threshold limits beyond which insurance would kick in.Even as insolvency professionals have started the resolution process under National Company Law Tribunal (NCLT