The crash of Air India (AI) Express Boeing 737 plane at the Kozhikode airport in Kerala has cost global reinsurers and Indian insurers Rs 660 crore ($89 million), the largest claim pay-out in the Indian aviation market.
Of the reinsurers’ total claim provision of $89 million, $51 million is for the hull total loss and $38 million for liability that may arise for passengers who died or were injured, TPL and baggage loss etc, said Atul Sahai, CMD, New India Assurance (NIA).
State-owned NIA, which has led the AI insurance account as the lead primary insurer, has paid Rs 373.83 crore as hull claim to Air India, the highest ever pay-out in the Indian aviation insurance market in this segment arising out of the crash.
On August 7, an AI Express flight from Dubai to Kozhikode overshot the runway in one of the worst aviation disasters in Indian history. The aircraft while landing in the night overshot the tabletop runway falling into a valley 35-feet below and broke into pieces, killing 21 people on board, including both the pilots, and leaving many others severely injured.
The majority of claims are funded by a few global reinsurers including GIC Re, which has paid $7 million as its share of claim settlement.
Besides paying for the full settlement for the Hull claim, NIA, the largest general insurer in the country, has also paid Rs 3.50 crore for liability as immediate relief to passengers affected. “We have paid $51 million equivalent to Rs 373.83 crore for Air India Hull claim arising out of crash landing at Kozhikode. Besides this, we have also paid Rs 3.50 crore for liability as immediate relief to passengers affected,” Sahai said.
All liability claims will be paid after completion of profiling of each and every passenger, documentation and assessment of all other liabilities which may arise in due course, Sahai said, adding that liability claim payment may take a few months to complete the documentation process at reinsurers end. “The payment for aircraft Hull has been made within two working days after receiving the necessary documents from reinsurers, setting high standards of service, reliability and always standing with our clients in the times of need and distress. It speaks volumes of our financial strength, cash liquidity and the trust bestowed on us by the entire Indian airline industry as we are writing almost all commercial airlines in India,” he said.
Air India had paid a higher premium of $30 million for a sum assured of $10 billion during 2020-21 renewal starting from April 1. The total liability under the liability policy taken by AI is about $750 million.
The AI insurance account is majorly reinsured — above 95 per cent — in the London market with global re-insurers like AIG, AXA Allianz and GIC Re providing the reinsurance capacity. Leading speciality broker Global Insurance Brokers was the broker for the AI cover. The AI Express will have to pay a compensation of around Rs 1.30 crore each to the next of kin of victims of the plane crash at Kozhikode International Airport as per the Montreal Convention treaty, which imposes penalties on air carriers for the death of passengers due to negligence.
As an interim compensation, families of all 190 people onboard have been paid by the airline’s insurance company, Air India had said. A consortium of four public sector insurers — New India Assurance, National Insurance Company, Oriental Insurance Company and United India Insurance Company — are the primary insurers of Air India.
The share of NIA 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.
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