MUMBAI: Despite hardening insurance market for airlines globally following some major tragedies this year, national carrier Air India has been able to renew its cover with just 15 per cent rise in premium for its 132-aircraft fleet.
According to sources, the demand was for 25 per cent hike over the existing premium but insurers had to eventually come down to 15 per cent over the soon-to-expire policy.
The sources in the London market, where the reinsurance for the cover is being decided, have confirmed that Air India’s insurance will be renewed in a day or so, and it can keep flying from October 1.
They have also confirmed that to renew the policy, the airline will be paying $26.75 million as premium, which is 15 per cent more than the existing cover which expires on September 30.
Air India, which has a fleet of 132 aircraft – 108 with itself and 24 with its two subsidiaries – 17 with Air India Express and 7 with Alliance Air, refused to comment.
While the insurance cover is provided by a consortium of public sector insurers led by New India Assurance, the reinsurance cover is being renewed by a couple of Lloyd’s syndicate. The deal is likely to be completed either on Monday or Tuesday, the industry sources said.
“Last year, we had provided the cover for $23 million. However, the rates have hardened up in the aviation insurance market in the wake of four aviation tragedies globally back to back and two minor incidents in the country itself this year. Besides Air India had its own claims, which was substantial this year.
“Though insurers were demanding a much higher premium of around $30 million, or 25 per cent over last year’s, the airline has been able to bring it down to 15 per cent,” industry sources said.
Malaysian Airlines faced two of its worst tragedies this year, one lost in the Indian Ocean with close to 300 people on board in March and another was shot down allegedly by Ukrainian rebels over its eastern airspace in July killing over 300 people. Besides, there were two other air crashes in Africa later in the year.
In the domestic market, IndiGo flight had an accident in Jaipur that injured more than two dozen people and an incident involving an AI plane in New York.
Air India’s current insurance policy, issued by New India Assurance, includes a $9.5-billion hull cover and a combined single liability of $1.5 billion.
Hull all-risk insurance covers any damage to the body of the aircraft caused by an accident, while war risks, part of hull cover, insures against wars, invasions, insurrection, rebellion and hijacking. In addition, the insurance covers liability toward passengers and covers legal protection against suits.
The heads of non-life insurers were in London last week for finalising the deal. While the consortium of state-owned non-life insurers is led by New India Assurance, the private sector firms are led by ICICI Lombard.
This is the first time in four years that Air India has to pay a higher premium to renew its account. In the past, renewal the premium had fallen by 10 per cent.
Insurance broking joint venture Aon Global has acted as the broker for the deal. (PTI)