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Air India Express to get $50 mn insurance claim
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SME Times News Bureau | 11 Aug, 2020
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.
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