New Delhi: 

The deadly crash of Air India Flight 171 has brought to light the dynamics of aviation insurance in India. A Boeing 787 aircraft bound for London crashed in just 30 seconds after departing from Ahmedabad Airport. Of the 242 onboard, only 1 survived. The disaster also took several lives of those on the ground and BJ Medical College’s Hostel Building where the aircraft crashed.

Hull All-Risk coverage:

The policy covers the physical damage to the aircraft. It is the keystone policy cover in an aviation business. It covers incidents on the ground and in-flight accidents and mid-air collisions. For a carrier like Boeing 787 Dreamliner, which also happens to be a wide-body aircraft, the insured amount stands generally around $280 million, depending upon the aircraft manufacturing specifications and maintenance history

Hull War risk coverage:

In addition to standard hull insurance, most airlines also purchase Hull War Risk coverage. It provides protection against terrorism, sabotage, and war-like events. If there exist any links to such elements in Ahmedabad crash investigations, and they find any such links, the concerned policy would cover the damage in that case.

Liability and Third-Party Coverage:

In major aviation accidents, liability and third-party coverage often represent the most significant financial cost. This includes legal responsibility for passengers and third parties, covering incidents such as death, injuries, loss of baggage or cargo, and damage to property.

Future Developments:

The financial burden from such incidents is distributed across a global network of reinsurers. As per Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), large aircraft claims, such as those involving a Boeing 787, are usually not handled by a single insurer. Instead, the risk is spread among reinsurers based in cities like London, New York, and Zurich, which is a standard arrangement for national airlines like Air India.

Aircraft insurance policies are typically structured in multiple layers. While the Hull All Risk might cover for $200–$300 million, third-party liability, especially on international flights, can exceed $500 million. This risk is divided among dozens of reinsurers, each typically covering 1.5% to 2%, while a lead reinsurer assumes around 10% to 15% and oversees the settlement process.

The total insurance payout is expected to reach several hundred crores. Through global reinsurers, the amount will be absorbed for most of the losses. This cardinal event in Indian aviation business is expected to affect India’s aviation insurance sector for sure, which is currently valued at around Rs 900 crore. Therefore, industry experts predict an increase in premium rates and more stringent underwriting standards in the upcoming insurance renewal cycle.

A compensation of Rs 1 crore was announced by the Tata Group, the parent company of Air India. It is decided as per the Montreal Convention. The convention came into existence in the year 1999, and India became a signatory to it in the year 2009.

The treaty talks about the international air carrier liability and establishes airline responsibility for passenger injury or death, baggage or cargo damage, and delays in international flights. Airlines are liable to pay the compensation amount in SDR (Special Drawing Rights). 

In the Air India case, it is bound to pay around 129,000 SDR to the aggrieved person and their families.

The crash is expected to unveil a lot of insurance and its policies applicable in the aviation business. Some examples are Hull All Risk Damage Cover, Hull War Risk Coverage, and Operational and passenger claims.

The policies are devised in such a manner as to cover all risks, covering everything from aircraft damage to third-party liabilities and war-related incidents.

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