Blitz Bureau
India’s deadliest plane crash in more than a decade is sending shock waves through the aviation insurance industry as it triggered one of the country’s costliest claims, estimated at around $475 million or Rs 39.4 billion or Rs 3,940 crore.
Ramaswamy Narayanan, Chairman and Managing Director at General Insurance Corporation of India, told Bloomberg, “This aviation insurance claim could be one of the biggest in India’s history.” General Insurance Corporation of India is one of the firms that has provided coverage for Air India.
Air India crash triggers massive Rs 3940 crore payout, one of India’s largest in aviation history
According to Narayanan, the claim for the aircraft hull and engine is estimated at around $125 million or Rs 1,044 crore. He estimated that the additional liability claims for loss of life for passengers and others will be around $350 million or Rs 2,923 crore. The accumulated costs are more than triple the annual premium for the aviation industry in India in 2023, according to data compiled by Bloomberg.
The financial repercussions of the crash that killed 241 people on board and others as it fell in a densely populated part of Ahmedabad in western India on June 12 will affect the entire global aviation insurance and reinsurance market. It’s also likely to make insurance costlier for airlines in India, as per Bloomberg.
Insurance premiums across the aviation industry are expected to increase in India, either now or at the time of policy renewals, according to sources known to Bloomberg.
On the Air India insurance payout, the total costs might climb since there were foreign nationals killed in the accident. Those claims will be calculated according to the rules in their respective countries, Bloomberg reported.
Insurers will first settle the hull claim, followed by liability claims, Narayanan told Bloomberg. “It will take some time for liability claims to be settled,” he added.
The impact on the domestic market will be partly reduced by the fact that both companies only generated about 1 per cent of their total insurance premium from aviation, and ceded most of it to global reinsurers, according to data compiled by Bloomberg.
Broadly, domestic insurers have offloaded more than 95 per cent of their aviation insurance direct written premium, or DWP, to global reinsurers.
Due to this, the financial burden will predominantly fall on international reinsurers, leading to the hardening of the aviation reinsurance and insurance market, Bloomberg reported, citing a statement given by Swarup Kumar Sahoor, a senior insurance analyst at GlobalData.