Airline Insurance Companies and Foreign Reinsurers Set to Pay Over $120 Million as Compensation for Air India Aircraft Accident
Crash in Ahmedabad: The Aftermath – A Huge Financial Hit
The Air India flight disaster has left a significant impact, not just in terms of human lives lost but also financially. The leading insurers, Tata AIG General Insurance, and London reinsurers are bracing themselves for a hefty payout of around $120 million, plus additional costs from Passenger Legal Liability Claims and third-party liability claims.
On a fateful Thursday afternoon, Air India Boeing 787 Dreamliner met a tragic end shortly after takeoff in Ahmedabad, claiming the lives of all 242 on board – passengers, crew, and unfortunate students from the BJ Medical College hostel, who became victims of the aircraft's destructive path. Of the deceased,169 were Indian nationals, 53 were British, 7 were Portuguese, and there was 1 Canadian citizen.
Air India Faces a Panel of Experts to Probe the Crash ReasonsTata AIG is the front-runner in insurance, holding a 10% share of the risk for this aircraft, with public sector general insurers – New India Assurance, Oriental Insurance, United India, and National Insurance – making up the balance, which is then reinsured in the London market. The insurers will process the claims, with the hull Agreed Value of the aircraft being approximately $80 million, covered under the Hull All Risk part of insurance.
In addition to the hull damage, around $40-50 million will be needed for Passenger Legal Liability and third-party liability claims, including building damage, property destruction, and medical expenses for the victims who lost their lives on the ground.
Multiple Angles of Liability for AirlinesThe operator Air India will face liability from various perspectives. The nationality of passengers will determine the minimum applicable liability under the Montreal Convention, while the third-party property damage liability comes into play due to the crash site being a residential area. Additionally, there could be additional liability for the loss of lives in the residential apartment that the aircraft impacted.
Aviation Insurance: Upsurge in Premium Rates ExpectedPublic sector non-life insurer New India Assurance had previously provided insurance coverage for Air India, but following the Tata Group's takeover of airline operations in 2022, Tata-AIG General Insurance took over the policy issuance. Air India paid around $20 million to insure its entire fleet when renewing the policy on April 1, 2025. With the crash, there is an expectation that aviation insurance premium rates will increase moving forward.
Passengers Entitled to CompensationThe Montreal Convention sets the maximum compensation for injury or death during air travel at around Rs 1.4 crore per individual, regardless of fault. If their negligence or fault can be proven, damages could be higher.
Total Liability Scheduled to Exceed ₹1000 croreWith passenger compensation alone totaling over Rs 377 crore, third-party property damage claims amounting to millions of dollars, and property damage claims being substantial but undisclosed, the total insurance claims are predicted to surpass ₹1000 crore, making it one of India's largest aviation insurance claims in history. The financial impact of the crash will be felt across multiple insurance sectors, including hull damage, operator liability, and property damage.
- The aftermath of the Air India crash in Ahmedabad could extend beyond the aviation sector, with the total insurance claims predicted to exceed ₹1000 crore, impacting general news, politics, and crime and justice.
- As the operator, Air India faces liability from multiple angles due to the crash, including Passenger Legal Liability Claims, third-party property damage liability, and potential additional liability for damage to the residential apartment impacted.
- In light of the Air India crash, policy and legislation surrounding aviation insurance may be subject to review and change, as the accident could result in an upsurge in premium rates for future coverage.
- The Montreal Convention entitles passengers involved in the crash to a maximum compensation of around Rs 1.4 crore per individual for injury or death, with potential for higher damages if negligence or fault can be proven, impacting car accidents and crime and justice.
