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Mint
13-06-2025
- Business
- Mint
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.
Hindustan Times
13-06-2025
- Business
- Hindustan Times
Air India plane crash could be India's costliest aviation insurance payout: How airline coverage works
The tragic crash of an Air India Boeing 787-8 Dreamliner on Thursday, which claimed the lives of 241 people, could end up being the largest aviation insurance payout in Indian history. Industry experts estimate the total liability could range between $211 million and $280 million (around ₹2,400 crore), reported news agency PTI. The aircraft, bound for London's Gatwick Airport, took off from Ahmedabad's Sardar Vallabhbhai Patel International Airport at 1:38 PM. Just 33 seconds into the flight, it crashed into a residential area. Of the 230 passengers and 12 crew members, only one British-Indian passenger, Vishwash Kumar Ramesh, survived the fatal incident. The flight included 169 Indian nationals, 53 British nationals, seven Portuguese citizens, and one Canadian passenger. The wide demographic range will be key in determining compensation under international aviation laws. Physical aircraft losses are estimated between $80 million and $250 million, depending on valuation factors like age, condition, and configuration, according to a report in Mint. Since the aircraft crashed into a residential apartment, there is third-party property damage liability on the operator. There might also be loss of lives in that residential apartment where the aircraft crashed,' Mint quoted Hitesh Girotra, Vice President at Prudent Insurance Brokers, as saying. While the airline has announced interim compensation of ₹1 crore for the deceased, final compensation for passengers will be determined under the Montreal Convention of 1999. According to this, the compensation per deceased passenger could be up to 1,28,821 Special Drawing Rights (SDRs), or about $171,000 (roughly ₹1.47 crore). The total loss to Air India, factoring in all categories of claims, is estimated between $211 million and $280 million. However, it is too soon to determine the total liability that the airline may face due to the widespread devastation caused by this crash. Like most global airlines, Air India does not rely on a single Indian insurer for coverage. Instead, coverage is spread across global insurance markets through a network of reinsurers. 'No single insurer bears the entire risk—coverage is widely distributed among global reinsurers, with shares as small as 1.5% to 2% and a lead reinsurer typically taking 10-15%,' said Narendra Bharindwal, president of the Insurance Brokers Association of India. 'Aviation insurance programs for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York,' he added. This model ensures that the financial impact of catastrophic incidents is absorbed across a broad global base. Mint reported that since Air India was acquired by the Tata Group, the responsibility of insurance procurement has shifted from government tenders to private mechanisms. Earlier, public-sector insurers competed in annual tenders. Now, the Tata Group has the autonomy to appoint insurers and reinsurers based on its assessment of risk and cost.
News18
13-06-2025
- Business
- News18
Air India, SpiceJet May Face $40–50 Mn Insurance Hike; Airfares Likely To Rise 2–5%: Report
Last Updated: Air India and SpiceJet may see insurance premiums rise to $40–50 million after the crash, possibly pushing airfares up by 2–5%. Despite the catastrophic crash of Air India Flight AI171 near Ahmedabad, immediate aviation insurance premium hikes are unlikely, Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), told Moneycontrol. However, he added that the cumulative impact of repeated Boeing-related incidents could drive up premiums across the aviation sector in the upcoming underwriting cycle. According to reports, Boeing aircraft operators—particularly Air India, which operates 34 Boeing 787s and has 20 more on order, and SpiceJet, which flies Boeing 737 MAX 8s—could face premium increases from around $28 million to as much as $40–50 million. This may lead to a 2–5% hike in airfares, sources told Moneycontrol, as airlines look to offset rising insurance costs. Moneycontrol. Premiums Could Rise 100% by 2026 Industry sources said that insurers may now view Boeing operators as higher-risk compared to Airbus-dependent carriers like IndiGo or Vistara, leading to a hardened market. Experts such as Hitesh Girotra of Prudent Insurance Brokers believe the combined fallout of the MAX and 787 issues—now topped by the Air India tragedy—could increase aviation premiums for Boeing operators by 20% to even 100% in 2026. 'The market is clearly hardening, and Boeing's deteriorating risk profile is a central reason," Girotra told Moneycontrol. The crash of Flight AI171 on June 12, killing 241 of 242 on board, marks the first-ever fatal Boeing 787 accident. The incident could spark insurance claims of up to Rs 300 crore split between Indian insurers and global reinsurers. The Aircraft Accident Investigation Bureau (AAIB) is probing the crash with support from Boeing and the U.S. National Transportation Safety Board (NTSB). If defects in the 787's design or production are uncovered, Boeing's liability insurers may face lawsuits echoing the $2.5 billion in settlements paid after the MAX disasters. Boeing's Long Road of Turbulence Boeing's aviation insurance costs surged after the twin MAX crashes in 2018 and 2019, which killed 346 people and exposed systemic failures in design and FAA oversight. The MAX was grounded globally for 20 months, costing Boeing more than $20 billion in direct losses and $60 billion in canceled orders. An internal 2016 survey cited by US investigators revealed that 40% of Boeing employees involved in safety certification felt 'undue pressure" to fast-track approvals. The fallout led to significant premium hikes for Boeing operators, with Air India's own insurance cost nearly doubling post-2019. The troubles didn't end there. The 737 MAX 7 and MAX 10 are still awaiting certification as of June 2025, with approvals delayed to 2026 due to technical flaws and tightened FAA scrutiny, especially after the Alaska Airlines MAX 9 door plug blowout in January 2024. The FAA has also revoked Boeing's authority to self-certify airworthiness for MAX aircraft. Meanwhile, Boeing's 787 program has been under audit after reports of fastener installation errors and falsified records. The crash of Flight AI171 only intensifies these concerns. Airlines May Pass Costs to Flyers Analysts told Moneycontrol that higher insurance costs could derail Air India's ambitious fleet retrofit program and strain SpiceJet's planned Rs 3,000 crore capital raise, likely prompting a cost pass-through to passengers. 'In a hardened insurance market, Boeing operators are clearly under pressure. Passengers could bear the brunt in the form of higher fares," one analyst noted. With the insurance market tightening and Boeing's risks amplified, the financial impact of the Air India crash is expected to ripple across global aviation, insurers, and passengers alike. tags : Air India crash Aviation disasters Location : New Delhi, India, India First Published: June 13, 2025, 12:36 IST News business Air India, SpiceJet May Face $40–50 Mn Insurance Hike; Airfares Likely To Rise 2–5%: Report
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Business Standard
13-06-2025
- Business
- Business Standard
Air India crash: What families of victims can expect in compensation
Following the tragic crash of a London-bound Air India Dreamliner shortly after takeoff from Ahmedabad International Airport, attention has turned to the financial and legal compensation available to the families of the 242 passengers and crew on board. Experts say compensation will be governed by the Montreal Convention of 1999, an international treaty to which India is a signatory. According to Hitesh Girotra, Vice President (Aviation & Specialty Lines) at Prudent Insurance Brokers, compensation will be calculated under the Montreal Convention, which standardizes airline liability across international borders. India signed the treaty in 2009, making it applicable to this incident involving both Indian and foreign nationals. Passenger Compensation: Governed by the Montreal Convention (1999) India is a signatory to the Montreal Convention, a global treaty that standardizes rules on airline liability for passenger injury or death. This treaty applies when: The airline's home country (India, in this case) and the passenger's nationality are parties to the convention. The flight is international, which includes flights like Ahmedabad to London. How much compensation is guaranteed? As per the Montreal Convention, the airline is liable for damages up to 128,821 Special Drawing Rights (SDRs) per passenger regardless of fault. As of October 2024, 1 SDR = approx USD 1.33, so: 128,821 SDR ≈ USD 171,341 per passenger (minimum). Compensation applies regardless of the airline's fault up to this threshold. Airlines may be liable for additional compensation if negligence is proven. "Compensation is calculated using Special Drawing Rights (SDRs), which stood at 128,821 SDRs (approximately USD 1.33 per SDR) as of October 2024. The actual payout will depend on the coverage purchased by Air India," Agarwal told PTI. Nationality matters: Compensation can vary slightly depending on passenger nationality due to how the treaty applies in cross-border cases. The nationality of passengers—169 Indians, 53 British, 7 Portuguese, and 1 Canadian—determines precise entitlement. This suggests each family could receive at least ₹1.5 crore, with interim compensation already in planning. Tata Group has announced an initial ₹1 crore per victim as immediate relief. What is SDR (Special Drawing Rights)? SDR is a currency-like reserve asset defined by the International Monetary Fund (IMF), based on a basket of currencies including the USD, Euro, Yen, Pound, and Yuan. It's used to standardize international payouts. Aircraft Insurance: Hull & Liability There are two parts to aviation insurance: 1. Hull All-Risk Insurance Covers damage to the aircraft itself, whether partial or total. The crashed Dreamliner (VT-ABN) was a 2013 model, insured at approx $ 115 million in 2021. This includes the aircraft, spares, and onboard equipment. As far as aircraft damage is concerned, Agarwal said, it would be covered under the aviation hull all-risk section, which insures 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 USD 211 million and USD 280 million, he said. "The aircraft involved (VT-ABN) was a 2013 model and, based on available information, was insured for approximately USD 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. 2. Liability Insurance (Passenger + Third Party) Covers compensation to passengers, third parties on the ground, and property damage. This insurance is purchased as a fleet policy, covering all aircraft operated by the airline. Who pays for this? (Reinsurance Model) No single insurer takes the entire financial burden. Instead, the policy is reinsured across global markets (e.g., London, New York). One major reinsurer (the "lead") takes 10–15% of the risk. Others share 1.5–2% each. The financial impact is distributed globally, reducing exposure for any one insurer. 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," Bharindwal said. It is too early to ascertain the overall liability (passengers and third party) on the operator because of this crash. Interim and Final Payouts While interim compensation may be announced by Air India shortly, final settlement amounts will be based on the Montreal Convention. "This ensures global standards of accountability and fairness," said Amit Agarwal, MD and CEO of brokerage firm Howden India. He noted that Air India's insurance coverage will significantly influence the final payout amount. The airline has reportedly insured the crashed Boeing 787 (registration VT-ABN), a 2013 model, for approximately USD 115 million under aviation hull insurance as of 2021. The combined value of aircraft damage, passenger liability, and third-party claims could easily exceed ₹1,000 crore, industry estimates suggest. This is higher than the total annual aviation insurance premiums collected across all Indian airlines, highlighting the magnitude of the event. The insurance payouts are expected to begin with interim payments, followed by comprehensive settlements after formal investigations and claims verification. Legal experts say payouts could take months or even years to complete, depending on whether claimants pursue additional damages.I What you should know Key points: Families of deceased passengers are eligible for automatic compensation of ~$171,000 under international aviation law. Higher payouts may occur if Air India is found negligent. The aircraft loss is insured and will be reimbursed. Liability risk is shared across global insurers, minimizing the impact on any one entity. With inputs from PTI
Indian Express
12-06-2025
- Business
- Indian Express
Air India plane crash: Victims' kin may get up to Rs 1.5 cr each as insurance compensation
The crash of Air India's Boeing 787-8 Dreamliner won't have any financial impact on the Tatas which own the airline as the aircraft is insured and people who perished in the crash will get suitable compensation from insurance companies. As per the Montreal Convention treaty, the Air India will have to pay a compensation of around Rs 1.5 crore each to the kin of victims of the plane crash. Air India will get adequate compensation for the lost aircraft from insurance companies. While interim compensation may be announced by the airline, final compensation for passengers will be determined under the Montreal Convention of 1999, to which India became a signatory in 2009. Compensation is calculated using Special Drawing Rights (SDRs), which stood at 128,821 SDRs (approximately USD 1.33 per SDR) as of October 2024. The actual payout will depend on the coverage purchased by Air India. Relatives of people who died in the crash will get around Rs 360 crore. 'The nationality of the passengers on board will define the minimum liability that is applicable to the operator as per Montreal Convention. Since the aircraft crashed into a residential apartment, there is 3rd party property damage liability on the operator,' said Hitesh Girotra, Vice President – Aviation & Specialty Lines, Prudent Insurance Brokers. In fact, Tata group insurance company will shell out the amount along with its foreign partner AIG of the US. Air India had renewed its mega $20 billion (Rs 171,000 crore) insurance policy with multinational AIG as the lead reinsurer on April 1. The primary insurers for the Air India policy are: Tata AIG General Insurance (lead insurer with over 40 per cent share), ICICI Lombard General Insurance, New India Assurance and other PSU general insurers. The final bill will be taken by the reinsurers. The airline had paid a premium of $30 million (Rs 257 crore), same as last year, for insuring over 300 aircraft. Aircraft damage would be covered under the aviation hull all-risk section, which insures 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. 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,' said Amit Agarwal, CEO and MD, Howden India. 'Understanding the age and the make of the aircraft, the hull agreed value of the aircraft would be roughly around $75-80 million which will be covered under the hull all risk part of the insurance,' Girotra said. This means Air India will get around Rs 680-980 crore as insurance amount for the lost aircraft. Almost 95 per cent of the Air India policy has been reinsured with a clutch of reinsurers led by AIG, Axa and Allianz. Public sector GIC Re also has a share in the policy including 4 per cent obligatory. The reinsurers will have to pay for 95 per cent of the claims, which will be accrued out of damaged aircraft, dead and injured passengers and third-party liabilities. Some people in the building, where the aircraft crashed, also died. There were 242 people on board. Insurance compensation for people perished in the crash will take its own time. The Boeing 787-8 Dreamliner has a list price of approximately $248.3 million. However, airlines usually secure substantial discounts, with actual sale prices typically falling between $150 million and $200 million. The liability section—likely the most significant component of the loss in the Ahmedabad incident—could amount to millions of dollars. 'This section covers the airline's legal liability to passengers and third parties, including medical expenses, cargo, and baggage losses. Early reports suggest the aircraft crashed into a civilian compound, which could result in substantial third-party claims,' Agarwal said. While interim compensation may be announced by the airline, final compensation for passengers will be determined under the Montreal Convention of 1999, to which India became a signatory in 2009. 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. 'Once coverage, ownership and financial interest in an aircraft is confirmed, the AIG Claims Promise works to provide immediate working funds of 50 per cent of AIG's share of the agreed amounts within 7 days,' AIG says in its website. On the industry impact, experts said this is a significant incident that could result in losses amounting to several hundred crores. The general aviation insurance premium market in India is estimated at around Rs 1,000 crore. 'While most large losses are reinsured, this event is expected to influence aviation insurance rates going forward,' Agarwal said.
