Air India plane crash: How is aviation insurance payout calculated? Will it be India's costliest? Experts decode
Air India Plane Crash: The Montreal Convention will be governing the insurance payouts to nominees of the passengers who died in the Air India plane crash in Ahmedabad on Thursday, experts have said. While Air India may declare an interim payout, the actual compensation will depend on the coverage purchased by the airline.
India is a signatory of the Montreal Convention, applicable provisions of which will be applied while implementing the insurance payouts, they said, according to a report by PTI.
According to Prudent Insurance Brokers vice president (aviation & specialty lines) Hitesh Girotra, the minimum liability applicable to the airline operator will be dependent on the nationality of the passengers who lost their lives.
While an interim compensation may be announced by the airline, the final insurance payouts for passengers will be determined under the Montreal Convention of 1999, to which India became a signatory in 2009, brokerage firm Howden (India) MD and CEO Amit Agarwal said.
"Compensation is calculated using Special Drawing Rights (SDRs), which stood at 128,821 SDRs (approximately $1.33 per SDR) as of October 2024. The actual payout will depend on the coverage purchased by Air India," Agarwal was quoted as saying by PTI.
According to Amit Agarwal, the compensation for the Air India aircraft damage will be covered under the aviation hull all-risk section. This includes insurance for the current valuation of the aircraft, including spares and equipment.
For a Dreamliner, depending on its configuration, age, and other factors, this value can range between $211 million and $280 million, he said.
'The aircraft involved (VT-ABN) was a 2013 model and, based on available information, was insured for approximately $115 million in 2021. Whether the damage is partial or total, the loss would be covered based on the value declared by the airline,' he said.
According to Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI), aviation insurance programmes for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York.
'No single insurer bears the entire risk -- coverage is widely distributed among global reinsurers, with shares as small as 1.5 per cent to 2 per cent and a lead reinsurer typically taking 10-15 per cent. The financial impact of such incidents is shared globally across this network,' he said.
Currently, Air India and IndiGo are the two Indian airlines operating the Boeing 787 planes.
Of the 34 B787s in the Air India fleet, 27 B787-8s are legacy aircraft. The first of the legacy B787-8 is slated to go for retrofit in July. The remaining seven B 787-9 joined the Air India fleet after the merger of Vistara with it last year.
Globally, the Ahmedabad crash is the first time that hull loss has happened for a B787 aircraft, according to an official.
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