General Insurance Corporation, the country’s sole reinsurance company, expects . 75-crore claim from Malaysian Airlines, one of whose aircraft vanished between Malaysia and China last week with 239 passengers on board.
GIC has a 3% share of the total claim, which may be around $400 million, including for passengers. GIC’s policy covers the plane’s hull and machinery and passenger liability. “For us, the claim will come to around . 75 crore,” said AK Roy, chairman and managing director, GIC. Hull and machineryinsurance is a protection for airline from any damage. However, the company has bought reinsurance to protect itself from a large aviation claim.
GIC participates in consortium of global reinsurers who write protection forinsurance companies, which, in turn, insure projects such as factories, airlines and railways against natural calamities. Insurance companies seek protection from a bunch of reinsurers such as Munich Re, and Swiss Re, as keeping huge risks such as the latest airline claim could wipe out an insurer.
The airline was insured for $300-$400 million for passenger liability and $100 million for its parts.
The incident may push up the premium for insurance as well as reinsurance of aviation companies, say insurers. Premium is directly proportional to claims. The premium rates have been steady in the past few years as there were not many claims. “This might harden the aviation rate for Asian market,” said an executive from GIC. “The rates were soft since 2010 as there were not many large claims, thanks to safety records.” Indian airline companies will renew their policies in later part of the year. There were no major claims since 2009 when an Air France flight crashed in the Atlantic, and Libyan airline Afriquiah Airways at Tripoli International Airport and Air India crashed in Mangalore. Air France led total claim of $650 million on global insurance industry in which GIC bore 3.5% of the claim.
Source: The Economic Times
Writer: SHILPY SINHA MUMBAI