Air India is set to extend its insurance cover, and is likely to shell out up to 15% higher premium because of a big claim related to an accident in Jaipur and hardened premium rates globally.
Air India had paid $24 million last year and its contract with New India Assurance has a provision to roll over the cover. It is expected to insure aircraft hull for $10 billion and take a liability cover of $1.5 billion. New India Assurance has made a presentation to Air India to extend the policy, said an executive of the state-run insurer.
“The rates have hardened in the international market. Premium will go up by 10%-15% because of the Jaipur loss,” he said, asking not to be named.
“If they go for a fresh cover the cost may go up further.” Air India had filed for an $18 million claim due to an accident in Jaipur. If it decides to extend the cover, it will be the second straight year when Air India has gone for the rollover. The airline has used this provision last time and nothing stops it from extending it this year also, said the executive cited earlier. Hull and machinery insurance is a protection for airline from any damage. The airline takes a cover of $175 million per aircraft. The policy is due for renewal on October 1. Air India has already floated a tender to call for technical bids.
Rates have increased for both aviation insurance and reinsurance following the missing of a Malaysia Airlines plane in March and then the alleged shooting down of another aircraft of the same airline over Ukraine. Premium is directly proportional to claims. Rates had been steady before the Malaysia Airlines tragedies as there weren’t any many claims in recent years.
Source: The Economic Times