A host of adverse factors including the recent crash of one of the Ethiopean Airlines aircraft, have put an end to the days of discounts for the national carrier Air India(AI), whose insurance renewal cost, at around $28 million, has doubled in 2018-19.
The insurance renewal deal for AI’s fleet of 180 aircraft, with a sum assured of $ 12 billion, the largest Indian aviation insurance account, is currently is getting concluded in the London market and would be effective from Apr 1.AI’s insurance renewal also include $ 30 million passenger liability cover.
Considering the hardening of the market, AI which normally renews its insurance account in October of every year, AI had sought six month extension for its existing cover in October.
New India Assurance, India’s largest general insurance player, is the lead insurer of the Air India deal while reinsurance deal is led by the US major AIG.
“The aviation insurance market has been hardening for the last one year and Ethiopian Crash and the Pulwama event which is an act of terrorism had put extra pressures on the markets at the time of the Air India’s premium pricing,’’ said sources at the London market adding that there were some claims, over $ 40 million from the AI side.
AI is purely a reinsurance driven account and almost over 95 per cent of cover is reinsurerd in the London market.
Air India’s renewal premium had constantly fallen for the last few years last till 2017-18 when it had availed a discount of 20 per cent and had paid premium of $ 14 million.
The national carrier had shelled out a total premium of $18.38 million in 2016-17, which was 30 per cent lower than the previous year's premium.
India has many large aviation insurance accounts including Jet Air Ways, IndiGo and Spice Jet, and GoAir which have to face a hard market when they come for renewal in the next few months, said aviation insurance anaysts.
Jet Air ways is insured with Oriental Insurnace while Spice Jet and IndiGo are insured with NIA.
Meanwhile, GIC Re has a 3 per cent exposure in Ethiopian Airlines insurance cover and would be settling the claims proportionately soon forthe crashed aircraft.
An Ethiopian Airlines passenger jet bound for Nairobi had crashed minutes after take-off, killing all 157 people on board, raising questions about the safety of the Boeing 737 MAX 8, a new model that also crashed in Indonesia in October.
Insurers typically form a consortium to share the risks of large claims, with the lead insurer taking a larger proportion of the risk. The insured value of the plane itself was likely around $50 million (£38 million), according to industry sources.
Britain’s Global Aerospace was the lead insurer for Boeing and also for Lion Air, which operated the plane that crashed in October.
According to Willis Tower Watson, one of the leading international aviation insurance broker, while there is still plenty of available capacity in aviation insurance, market withdrawals and merger activity among insurers are putting pressure on total available capacity.
Losses in aviation insurance market in 2018 have already surpassed 2017 levels in terms of frequency and severity.
Accounts with growth and favorable loss history can expect flat rates or only slight increases while accounts with little or no growth and unfavorable loss history should expect larger increases, said Willis Tower Watson.