India’s deadliest plane crash in more than decade is set to send shock waves through the aviation insurance industry and trigger one of the country’s costliest claims, estimated at around $475 million.
“This aviation insurance claim could be one of the biggest in India’s history,” said Ramaswamy Narayanan, chairman and managing director at General Insurance Corporation of India, one of the firms that has provided coverage for Air India.
The claim for the aircraft hull and engine is estimated at around $125 million, according to Narayanan. He estimates additional liability claims for loss of life for passengers and others will be around $350 million. The sum is more than triple the annual premium for the aviation industry in India in 2023, according to GlobalData.
The financial repercussions of the crash that killed 241 people on board and others as it fell in a densely populated part of Ahmedabad in western India on Thursday will ripple through the global aviation insurance and reinsurance market. It’s also likely to make insurance costlier for airlines in India.
Insurance premiums across the aviation industry are expected to rise in India, either now or at the time of policy renewals, according to people familiar with the matter.
On the Air India insurance payout, totals could climb, since there were foreign nationals killed in the accident, and those claims will be calculated according to the rules in their respective jurisdictions, the people said, who asked not to be identified discussing private matters.
A spokesperson for Air India did not immediately reply to request for comment.
Insurers will first settle the hull claim followed by liability claims, according to Narayanan. “It will take some time for liability claims to be settled,” he said.
The impact on the domestic market will be partly mitigated by the fact that both companies only generated about 1% of their total insurance premium from aviation, and ceded most of it to global reinsurers, according to GlobalData’s insurance data.
Broadly, domestic insurers have offloaded more than 95% of their aviation insurance direct written premium, or DWP, to global reinsurers.
Due to this, “the financial burden will predominantly fall on international reinsurers, leading to the hardening of the aviation reinsurance and insurance market,” said Swarup Kumar Sahoor, senior insurance analyst at GlobalData in a release on Monday.