The unbridled growth in the aviation sector has come as a bonanza for the insurance sector. Thanks to capacity addition and the entry of new aviation players, a host of insurance companies are eyeing this growing market to offer insurance cover to new planes that are being brought to India.‘‘The aviation insurance market is looking up and is currently at Rs 350 crore. But with new aircraft being bought by new players entering the business and the existing one on an expansion mode, the aviation market is set to take off,’’ said Bajaj Allianz General Insurance’s Head-Underwriting K. Krishnamoorthy.Industry trackers believe that with several airlines including IndiGo, East West Airlines and Magic Air set to enter the market in the coming weeks, the airline premium income could be up 50 per cent in the next two years.Though India’s contribution to the total global insurance premium paid by airlines which stands at US $ 5.86 billion is miniscule, the growth in aviation premium payout is highest in China followed by India, experts say.Airline insurance whch is typically offered to passengers, cargo airlines or company or individually-owned aircraft generally consists of coverage to the aircraft and liability to passengers.Before the boom in the Indian aviation sector, the airline insurance market was dominated by the four state-owned general insurance companies: New India Assurance Company, Oriental Insurance Company, National Insurance Company and United India. However, with the growth in the Indian aviation story, private players like ICICI Lombard, Bajaj Allianz, Iffco Tokyo General Insurance and Reliance General Insurance Company are also trying to muscle their way into this lucrative sector.The unprecedented growth in this sector is also seeing private players join hands with each other to bid for accounts. The latest such case is the ICICI Lombard-Bajaj Allianz tie-up where they are jointly bidding for Air India’s insurance account which includes providing cover for 50 planes valued over $3 billion.Currently, a consortium of public sector insurance companies including New India Assurance, Oriental Fire and General Insurance and United Fire and General Insurance handle Air India’s account for which the airline is paying an annual premium of close to US $ 14 million.‘‘Aviation insurance business is a high severity loss business and in the future you could see a lot of Indian insurance companies joining hands to manage airline accounts,’’ an official from a PSU insurance company said.Experts say that the role of an reinsurer — generally foreign insurance companies — is also bound to increase in the future. Indian insurance companies do not have the financial muscle to address claims of airlines and generally go in for reinsurance which means sharing the risk of loss with another insurance company.‘‘The role of an reinsurer is important in the Indian context as most of the companies do not have the requisite experience of handling a market of this size. The reinsurer helps in providing the technical expertise, capacity to underwrite the business and their ability to handle such large risks,” the official said.Meanwhile, players also feel that airlines can also benefit from this growth in the market as growing competition could mean lower premiums. ‘‘The Indian aviation industry has had a few good years with no major losses reported and hence the players can have the benefit of reduction in premiums for good records. This would encourage clients to go for higher covers or optimize it,’’ Krishnamoorthy says.-zeeshan_shaikh@expressindia.com
