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NDTV
17 hours ago
- Business
- NDTV
After Dreamliner Crash, Insurance Cost May Raise Airfare By 2-5%
New Delhi: The aviation insurance industry may consider raising the premium paid by airlines in the next cycle, following the crash of the Air India Boeing 787-8 Dreamliner in Ahmedabad. A mix of expanding exposure to international routes, regulatory scrutiny, and high-value claims is expected to make the price of premium more expensive than it is now. An expert told NDTV Profit if the aviation industry passes on the rising cost of insurance premium to consumers, airfare may see a rise of up to 2 to 5 per cent. Air India and IndiGo have already renewed their policies for the year, said Sourav Biswas, business head - aviation insurance at Alliance Insurance Brokers. However, there could be a marked rise in premiums in the next billing cycle, Mr Biswas said. The loss of Air India's Boeing 787-8 Dreamliner along with the deaths of 241 people who were on board and 10 at the doctors' hostel where the plane crashed comes at a time when a multi-billion-dollar court ruling in the UK ordered global reinsurers to compensate for aircraft seized by Russia due to geopolitical tension. The timing of the UK court order and the crash, one of the deadliest aviation accidents in India, would add more strain on reinsurers who deal with hull insurance, which covers the aircraft itself, and liability insurance, which includes both passenger legal liability and third-party liability. The sum total of all these factors and India being one of the fastest growing markets for the aviation industry will likely raise the premiums. India's aviation industry's insurance premiums have been around Rs 1,000 crore historically, but it may get disrupted and the figure could change drastically. Aviation insurance for big airlines such as Air India are given on a fleet basis and reinsured across global markets like London and New York, said Narendra Bharindwal, President, Insurance Brokers Association of India. A single insurer does not take responsibility for the entire risk coverage; it is distributed among global reinsurers, with shares ranging from 1.5 per cent to 2 per cent. A lead reinsurer usually takes up to 15 per cent risk. "This incident, along with others in recent months, will likely result in a hardening of the aviation insurance market, not just for the airline involved, but across the entire aviation sector," Mr Bharindwal said. The Life Insurance Corporation of India (LIC) today announced immediate measures to ease the financial burden on the families of those who died in the plane crash. The insurer said that it would expedite claim settlements and offer concessions to support the affected families.
Economic Times
2 days ago
- Business
- Economic Times
Air India plane crash: At $120 million+, insurance claim to be costliest for Indian aviation
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel 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 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 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 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 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 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 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 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.
