Air India’s insurance renewal may not be a very comfortable affair for the Tatas from the premium point of view as London market sources point out, the aviation insurance market of late has seen significant hardening up impacted by Russian-Ukraine war and crash of a Boeing 737 aircraft of China Eastern Airlines killing all 132 passengers in the Chinese city of Wuzhou.
Premium for the war cover has also substantially gone up, said London market sources
Mumbai/New Delhi:
Tata Group, after acquiring Air India from the Indian government, has preferred to mandate a combined consortium of public sector and private sector general insurers to renew cover of the airlines from Apr 1.
Awarding the insurance mandate just before a week of renewal date and amidst hardening aviation insurance market, Tatas have added their own insurance company Tata AIG General insurance and ICICI Lombard General Insurance, the largest private sector insurer to the existing public sector consortium consisting of New India Assurance(NIA) and three other PSU general insurers, Oriental Insurance Company(OIC), United India Insurance(UII) and National Insurance Company(NIC) to provide the new cover.
Which insurer will get how much share of the cover will be decided at the time of placement. NIA, being the largest general insurer in the country, will get the largest portion of the cover, said sources.
NIA along with its PSU sister companies, barring one year in the last decades, has been providing the cover to Air India, one of the prestigious global insurance account with its 180 aircraft amounting $10 billion sum assured including $30 million passenger liability cover.
Since, it was earlier owned by the government, insurers for AI were always selected by bidding and it was the bidder with the lowest premium which used to get the mandate.
However like any other aviation account, Air India cover is largely reinsurance driven where almost 95 per cent of the cover is distributed among clutch of global reinsurers.
Apart from five per cent obligatory portion that has to be mandatorily reinsured with GIC Re, US based AIG has been a lead reinsurer for the Air India account for many years.
Though the whole process of finalising insurers and reinsurers almost takes over month, this time it can be placed within a week as everything can be finalised online, said market sources.
However, Air India renewal may not be a very comfortable affair for the Tatas from the premium point of view as London market sources point out, the aviation insurance market of late has seen significant hardening up impacted by Russian-Ukraine war and crash of a Boeing 737 aircraft of China Eastern Airlines killing all 132 passengers in the Chinese city of Wuzhou.
Premium for the war cover has also substantially gone up, said London market sources.
Insurers and reinsurers could face claims as high as $10 billion in a worst-case scenario due to the grounding of planes in Russia, Fitch Ratings said.
More than 500 planes that are financed or owned by non-Russian lessors are stranded in Russia due to sanctions imposed by numerous western countries in response to Russia’s invasion of Ukraine.
Air India, which paid $20 million, had almost saved $10 million premium in terms of refunds during 2019-20 as the number of flights were drastically cut due to Covid -19 pandemic.
However it had paid a higher premium of $ 24 million in 2020-21 as re/insurers had settled claims worth of Rs 700 crore due to Kozhikode crash involving a flight of Air India Express.
In 2021-22, its premium had further shot up $34 million.
“New pricing will be known in two days,” said sources.
Air India board has now Alice Vaidyan, former CMD of GIC Re, as an independent director.