Air India plane crash: At $120 million+, insurance claim to be costliest for Indian aviation

Economic Times

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The catastrophic crash of an Air India flight in Ahmedabad on Thursday is likely to trigger the costliest aviation insurance claim involving an Indian airline, with claims estimated to exceed $120 million, people familiar with the matter said.Of the estimated payout, the hull loss—the insured value of the aircraft— alone could be around $80 million, while passenger liability compensation could add between $30-50 million.The total liability payout could be significantly higher, with one estimate pegging potential passenger-related claims at over $100 million, given the presence of several high-networth individuals onboard.Tata AIG was the lead insurer and others including New India Assurance had written part of the policy. The aircraft was covered under a global reinsurance programme, placed in the London market, whereby most of the risk is ceded to international reinsurers.Indian insurers like Tata AIG, New India Assurance, National Insurance, United India, Oriental and ICICI Lombard General have retained less than 10% of the risk, market participants said. State-owned reinsurer GIC Re has 5% on the reinsurance treaty and will see a claim of about $4.1 million, they said.'Today's incident… is expected to trigger claims under both the hull and liability sections due to the total loss of the aircraft and the fatalities. Such losses generally affect multiple reinsurers, as airline fleet policies are often placed on a facultative basis involving several participants. Since liability claims take time to quantify, it is currently difficult to assess the impact on future pricing," said Ramaswamy Narayanan, CMD of GIC Re.'This would be one of the biggestever claims involving an Indian airline,' said Sourav Biswas, aviation business head at Alliance Insurance Brokers.Historically, Indian carriers have witnessed few major accidents. In 2010, a Boeing 737 operating from Dubai crashed on landing at Mangalore, killing 158. Another crash at Kozhikode in 2020 claimed 21 lives.Combined, these two incidents led to insurance payouts of about $60–70 million, including hull and liability, insurance industry insiders said. A Tata AIG spokesperson said as the lead insurer for Air India, the company is closely monitoring the situation. Air India's liability limit is up to $1.5 billion, an inurance executive aware of the subject said. There could be around $250,000 per passenger potential liability for bodily injury or bodily injury leading to death, added the person who did not want to be named. The crash is likely to harden reinsurance rates across the board. Aviation insurance is a global pool, and any large loss in one part of the world impacts pricing everywhere.'This will affect renewals next year,' a senior reinsurance executive said.'Aviation rates may go up globally, and more so in markets like India where loss ratios have otherwise been benign.' Tata Group-owned Air India's aviation insurance policy is typically renewed on April 1 each year, with a panel of insurers led by global brokers in London.While New India Assurance had traditionally led the placement for the national carrier, Tata AIG is understood to have taken over that role since the airline's privatisation. New India and other Indian insurers now hold supporting roles, industry executives said.