Air India Express to get $50 million insurance claim
The Air India Express plane that crashed at Kozhikode airport on Friday evening was owned by the airline and was not a leased one, said an airline official.
The Air India Express plane that crashed at Kozhikode airport on Friday evening was owned by the airline and was not a leased one, said an airline official. Out of its total fleet of 25 Boeing 737-800 NG aircraft (post crash 24 aircraft), Air India Express owns 17 aircraft (16 post crash) and the balance eight were taken on lease.
A senior insurance industry official told IANS that the entire claim amount will be paid to the airline if it is an owned aircraft.
If there is any loan taken on the plane then the financier will also have a financial interest in the crashed craft.
All the owned aircraft of Air India Express underwent refurbishment of the cabin involving a change of seats, carpets and curtains.
The airline had said the refurbishment project resulted in the empty weight of the aircraft reducing by about 800 kg due to the lighter weight of the new seats, resulting in the gain of additional traffic payload and revenue earning capability to that extent on every flight.
With the lead reinsurer of the plane approving the claim for total loss of the Dubai-Kozhikode flight, Air India Express will get the entire claim of $50 million.
"Like the consortium of primary insurers, a consortium of reinsurers has insured the aircraft of Air India and its subsidiaries like Air India Express. The lead reinsurer, AIG London, has approved the hull claim (claim for loss of aircraft). Other reinsurers in the consortium will also give their approval," the senior official with one of the four insurers told IANS on Monday, preferring anonymity.
A consortium of four public sector insurers -- New India Assurance, National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd -- has insured the fleet of about 170 aircraft belonging to Air India and its subsidiaries, including Air India Express.
The airline has taken policies covering the aircraft or hull and liability for third party and passengers.
According to an official, the total liability under the liability policy taken out by Air India is about $750 million. The compensation to be paid to the passengers will be as per the Montreal Convention.
According to the official, the lead reinsurer has also estimated the interim claim amount to be paid for the total loss of the aircraft.
The official said the loss adjuster has been intimated. Normally the name of the loss adjuster is also part of the reinsurance contract and in this case, it is Charles Taylor Adjusting, London.
"The aircraft hull insurance is an 'all risk policy'. The explicit risk exclusions define what is covered. Many of the exclusions like war, terrorism risk, and claims deductible can be covered for a premium," the official said.
As a part of the claims procedure, the insurers/reinsurers will call for documents like the accident investigation report, aircraft maintenance log book and pilot log book, among others.
The official also said that Boeing -- the manufacturer of the aircraft -- will also be interested in the accident to know the reasons behind the mishap.
The ill-fated Air India Express skidded off the runway (technically known as runway excursion) of the Kozhikode airport and fell into a valley before breaking into two pieces, killing 18 persons and leaving scores injured.
As the aircraft is now a total loss, the scrap value will be calculated and adjusted against the claim amount.
In the case of passenger liability or compensation to be paid to the passengers or the legal heirs of the passengers, a legal team will be there to ascertain the legal position of the claimant.
Passenger liability also covers the baggage value.
According to an official, the total liability under the liability policy taken out by Air India is about $750 million.
The compensation for a passenger's death or bodily injury will be calculated as per the Montreal Convention which is roughly up to $175,000 per passenger.
Industry officials told IANS that the direct claim hit for the consortium of four insurers will be only about 10 per cent of the aircraft value.
The balance value of the risk has been reinsured with Indian reinsurer GIC Re -- 5 per cent obligatory cession and 85 per cent with reinsurers with the lead underwriter, AIG, London.
The total premium earned from Air India was about $36 million.
The share of New India in the premium and claims will be 40 per cent and the balance 60 per cent will be shared equally by National Insurance, Oriental Insurance and United India.
The official said the total commercial aviation insurance market in India with about 510 aircraft will be about $90 million.
"The risk is concentrated on a small base while the value is very high," the official said.