Garment factory: Karachi factory partially insured with Reliance

The company insured the Bhoja aircraft that crashed this year.

KARACHI: The Karachi garment factory where 259 people were killed by a massive inferno was partially insured with the Reliance Insurance Company – the same firm that is yet to pay hundreds of millions of rupees in compensation to families of the Bhoja air crash victims.

According to an industry official, Reliance Insurance Company had insured 70% of Ali Enterprises’ assets, whereas the remainder were secured by Premier Insurance.

“The plant was heavily underinsured,” the official added. “Only Rs80 million will be paid to the owners for the destruction of their property, including the plant and machinery.”

Surveyors of the insurance company visited the factory on Thursday to assess the damage.

The cause of the fire is yet to be ascertained, raising doubts over the repayment of the meagre amount to the factory owner, the official said.

No official from the two insurance companies or Ali Enterprises was available for comment.

Reliance is already reeling under pressure for compensating families of the Bhoja air crash victims.

Industry officials said that Ali Enterprises – a company not listed on the stock exchange – had taken loans from banks and would try to get its hands on the insurance amount before compensating its workers.

“If it is proven that the incident was a result of sabotage then there will be no insurance payment since terrorism is hardly covered,” said another official who heads an insurance firm.

“But even if the money is released, banks will be ready to get most of it.”

Under Pakistan’s labour laws, entrepreneurs have to pay at least Rs200,000 as life insurance to each worker.

It is unclear, however, if Ali Enterprises had bought insurance cover for its employees.

Reliance Insurance is one of the smallest insurance companies in the country, with just over Rs1 billion worth of assets.

It was under the spotlight due to the Bhoja air crash for allegedly buying reinsurance from a Russian company instead of more credible British companies.

Published in The Express Tribune, September 15^th, 2012.