AI, which was renewed successfully on Apr 1 in the London market, has kept its old pack of insurers and reinsurers but has allocated higher shares to its own group company Tata AIG General insurance, which is now the leader for the policy and another private sector insurer ICICI Lombard General Insurance and reducing the shares of PSU general insurers led by New India Assurance
London/Mumbai:
Tatas owned Air India, the second largest airlines in India, has managed to renew its insurance cover cheap for FY 2024-25 by retaining the last year premium for $30 million but for a much larger fleet size with a higher sum assured of $12 billion.
In FY 23-24, the airlines fleet size has expanded to over 200 aircrafts from 140 after Air Asia India was merged with Air India last year and the sum assured of the AI’ s policy has shot up by 20 per cent to $ 12 billion from $10 billion. It is expected go up further after Vistara, another airlines belonging to Tatas, is expected to merge with AI soon.
AI has not seen any premium hike for the last two years.
AI, one of the prized accounts in the Indian insurance industry, was renewed successfully on Apr 1 in the London market and has kept its old pack of insurers and reinsurers but has allocated higher shares to its own group company Tata AIG General insurance, which is now the leader for the policy. Another private sector insurer ICICI Lombard General Insurance has also got higher shares while the shares of PSU general insurers led by New India Assurance(NIA) have fallen in the 2024-25 placement.
Now, NIA’s share in the AI policy has fallen to 50 per cent while Tata AIG General Insurance share has gone up to 40 per cent.
Earlier, AI, under the government ownership, always has preferred to provide larger share to NIA, the largest general insurer in the country, because large claims can only be handled by big insurers like NIA.
The Tata group, after acquiring the company from the government, is preferring to allocate higher share to its own general insurance subsidiary, Tata AIG General insurance and even using its own insurance broker TATA Motors Insurance Broking and Advisory Services Limited as it wants to save on cost incurred on placing on such a large policy.
Like all aviation insurance policies, AI policy is reinsurance driven and almost 95 per cent of premium is passed on to global reinsurers, who reinsurer the cover and will have to pay the claims.
AIG has led the AI’s reinsurance policy and other global reinsurers along with India’s GIC Re have shares in the policy.
“With a good track record and relatively a calmer global aviation insurance market, AI has managed to hold on to the last year premium of $30 million for a policy of $12 billion,’’ said London market sources.
Air India operates a mixed fleet of Airbus and Boeing planes, including B777-200LR, B777-300ER, B787-800 Dreamliner, A319, A320, A320neo and A321 jets serving 102 domestic and international destinations.
Earlier, AI had announced that it would acquire 470 new aircrafts over next couple of years from Airbus and Boeing, including 260 wide body planes, the largest order ever from any Indian airline and among the largest globally.
With IndiGo, which has more than 300 planes in its fleet currently also adding 500 additional aircraft in the next few years, slow moving Indian aviation insurance market, with around 700 commercial airplanes, is set to double from Rs 850 crore in couple of years.
India’s largest airline IndiGo, with 300 aircraft, will go for insurance renewal in July and is expected, get a friendly response from the international reinsurers like AI, if something dramatic doesn’t happen in the meantime.
Despite the global pandemic and the increase in geopolitical tension over the last few years, the aviation industry continues to perform well from a claims perspective. Major claims in the sector tend to be low-frequency/high-value though, said the latest note on global aviation insurance market by WTW, an international reinsurance broker.
The political unrest in Sudan in April 2023 led to the destruction of a number of civilian aircraft, and while the ongoing crisis in Israel has not led to any major aviation claims at this point, both issues have put upward pressure on prices, particularly in the hull war sector of the airline insurance market, said the note
This year has also already witnessed two incidents that will translate into hull claims, one for Japan Airlines and the other for Alaska Airlines. It should be noted though that the liabilities associated with the incidents have been relatively low and with preliminary investigations suggesting that emergency procedures performed as required, the pilots and crew on both airlines should be commended, observed the multinational insurance broker.
Despite the suggestion that they may not be as significant as first feared, the claims resulting from the crisis between Russia and Ukraine are still very high on the agenda, and they are likely to remain there until the issue of the re-registered aircraft is satisfactorily resolved, said WTW.