Patience Saghana
Insurance companies in India are scramble for Air India’s insurance account of $9.1 billion (N1.3trillion)
The sum assured by AI has increased to $9.1 billion in 2010_11 from $8.59 billion in 2009_10. ICICI Lombard has offered the most attractive deal, under which the airline will pay $29.95 million for 134 aircraft.

Within the total sum assured, hull liability will be covered for $27 million, war insurance $1.39 million and war liability for $1.23 million. This is despite aviation insurance rates going up globally by 10-15 per cent

A consortium led by The New India Assurance Company Ltd, had written to the CVO of AI that the Reliance General-led consortium which won the contract had not adhered to the contract norms. The airline had paid $24.3 million to Reliance General Insurance for a total sum assured of $8.59 billion.

The private sector consortium was led by Reliance General Insurance with HDFC Ergo, Bajaj Allianz and Iffco Tokio General Insurance Company as partners, whereas the public sector consortium was led by New India Assurance. ICICI Lombard General Insurance was the third bidder. New India Assurance came close with a bid of $24.9 million.

The cover size has gone up to $8.59 billion as against $6.39 billion in 2008-09. The state_owned airlines has paid $24.3 million premium to insure 134 aircraft. The public sector bidder has lost this mega cover after seven years. Last year, the airline had paid $19.5 million to insure 140 aircrafts.

Reliance will retain 10 per cent of the risk while it will place the rest 90 per cent in the international market.
Insurance company executives said the rates had firmed by 30 per cent in case of bad claim experiences.

There was not much increase in the premium in quotes this year, even though Air India had a hull loss of $100 million in the Mangalore air crash. The premium rates as quoted by ICICI Lombard have increased by 20 per cent against the increase in fleet size of six per cent. AI had recorded growth in passengers as well.

Industry sources said though the reinsurance price was $33.7 million, ICICI Lombard had agreed to insure the aircraft for $27 million for the hull and liability cover. It had agreed to cover the entire risk for $29.95 million.

“Given the huge price differential, there is already news from international reinsurance markets that after a major loss in May of an estimated $100 million, the placement will be stressed and difficult,” said an insurance broker.