The public sector New India Assurance Company Ltd-led consortium which insured the Air India's fleet of about 170 aircrafts, including the ill-fated Air India Express plane that crashed at Kozhikode, may not be hit hard by the claims owing to reinsurance cover, said industry experts.
However, they did agree that the aviation insurance rates may harden next fiscal.
A consortium of four public sector insurers — New India Assurance, National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd — are the primary insurers of the Air India Express' Boeing 737 plane that met with an accident on Friday at the Kozhikode airport, said officials.
"The Air India Express plane that met with an accident has been insured for about $50 million. Air India has different aircrafts with varied values," an official of an insurer told IANS preferring anonymity.
The airline has taken policies covering the aircraft or hull and liability for third party and passengers.
"As far as the aircraft is concerned it is a total loss now. The claim amount will be the agreed value. Apart from that there will be claims towards rescue and other charges," the official said.
However, the direct claim hit for the consortium of four insurers will be only about 10 per cent of the aircraft value.
The balance value of the risk has been re insured with Indian re insurer GIC Re — five per cent obligatory cession — and 85 per cent with reinsurers with the lead underwriter being AIG, London, the official said.
The total premium earned from Air India was about $36 million. The share of New India in the premium and claims will be 40 per cent and the balance 60 per cent is shared equally by National Insurance, Oriental Insurance and United India.
According to the official, the total liability under the liability policy taken by Air India is about $750 million. The compensation to be paid to the passengers will be as per the Montreal Convention.
The official said the total commercial aviation insurance market in India with about 510 aircraft will be about $90 million.
"The risk is concentrated on a small base while the value is very high," the official said.
Asked about the impact in the primary and the reinsurance premium rate due to the accident, the official said: "The rates will harden. The aviation industry is not doing well. Apart from hardening of the rates increased accidents will make it difficult for the primary insurers to place the aviation risk in the global reinsurance market.".