Air India has finalised $20 billion insurance cover for its expanded fleet post Vistara merger at existing rates, it is learnt.
While the sum insured has increased from $12 billion to $20 billion, the premium outgo will remain unchanged at around $30 million.
While globally aviation insurance premiums are expected to inch up following a spate of accidents in the past few months, Air India has managed to secure good rates. This is because of overall softness in aviation insurance market, deft negotiations, the airline’s risk management practices and absence of major claims, sources said.
The $20 billion insurance will cover against damage to aircraft from incidents, accidents or war. This covers 300 plus planes belonging to Air India and Air India Express. There is a separate cover for passenger and third party liabilities.
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Tata AIG is the lead insurer for Air India taking a significant portion of risk. Indian public sector insurance firms and ICICI Lombard have a smaller share of sum insured. The entire risk has been underwritten by London based reinsurers.
Air India declined to comment.
“TATA AIG is a proud insurance partner of Air India who has demonstrated unwavering commitment to operational excellence and diligent risk and safety management. Insurers are generally inclined to respond positively to such clients with strong safety records and robust growth trajectories,” said Deepak Kumar, senior executive vice president & head (Reinsurance, Credit & Aviation Insurance), TATA AIG General Insurance.
Accidents and aircraft seizures
For past couple of years there has been overcapacity in aviation insurance market with more reinsurers willing to underwrite risk. This led to intense competition and softer premium rates.
However, recent accidents and the outcome of litigation between lessors and insurers over seized aircraft in Russia are expected to influence premiums this year.
Insurance companies make a provision in their accounts of the claim amount. While it is easier to reserve a hull loss, claims related to passenger liability are finalised after taking opinion from lawyers.
While there have been accidents in Azerbaijan, Canada and Korea, the fallout of American Airlines crash in the US is being watched by the sector.
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“Insurers are closely monitoring the financial impact of liability claims (arising from accidents) and their reactions will likely become more definitive as the scope of these claims becomes clearer. While insurers remain cautious in their approach to upcoming renewals, we do not anticipate any sudden or drastic shifts in the insurance market right away based on these incidents,” Kumar said.
“Additionally, the unresolved issue of aircraft seizures due to geopolitical tensions continue to loom. The eventual claims that flow in insurance market resulting from the resolution of this situation will also likely influence premium rates as we move further into 2025,” he added.
A spokesperson of Germany based Allianz Commercial declined to comment. “It is too early to estimate the impact (of accidents),” he said.