How the crash impacts Air India, insurers and Boeing

Mint explores what the incident might mean for the airline, insurers and reinsurers, and other aviation players in the country:

How does Air India insure its fleet?

Till Air India was a government-owned entity, there used to be an annual procurement process, and the airline sought tenders from multiple insurance participants. The lowest bidder was awarded a 12-month contract. After being privatised, it is now up to the Tata Group to issue tenders or seek insurers as it deems fit. 

“For FY26, the group rolled over its existing policy—where the lead insurer is Tata AIG General Insurance, followed by New India Assurance and a few other PSU general insurance players and ICICI Lombard General Insurance. As a result, for Air India, any impact on insurance premiums will not arise immediately but only at the time of renewal of the policy next financial year,” said Amit Agarwal, managing director and chief executive officer of Howden India, the domestic subsidiary of Howden Insurance Brokers.

Also read: Air India plane crash: London-bound flight with 242 onboard crashes near Ahmedabad; Cop says ‘204 bodies and 41 injured’

How does aviation insurance work?

Being global entities, airline insurance cannot be completely underwritten by one Indian insurance or reinsurance company. Also, there are select insurers that underwrite aviation risk. This means that only a percentage of the insurance cover is borne by Indian insurers, and the bulk is borne by global reinsurers, largely based out of the Lloyd’s marketplace in London, the largest reinsurance capacity provider for the aviation sector in India. Tata’s general insurance joint venture partner AIG is reportedly the lead global insurer for Air India.

“Aviation insurance programs for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York,” said Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI). “No single insurer bears the entire risk—coverage is widely distributed among global reinsurers, with shares as small as 1.5% to 2% and a lead reinsurer typically taking 10-15%.”

In India, the aviation industry insurance premium is estimated to be around ₹900 crore. The Air India crash is estimated to cause losses far higher than the premiums collected from the industry during the year.

Also read: Boeing shares fall sharply as Air India crash spotlights series of previous accidents

What is the likely financial impact of the crash?

Based on the age and make of the aircraft, the Hull Agreed Value is estimated to be between $80 million and $250 million. According to industry players Mint spoke with, this will be covered under the ‘Hull All Risk’ part of the insurance cover.

Liability coverage, especially for flights operating in or to regions like Europe, is being pegged between $150 million and $500 million, based on the extent of damage and far exceeding the cost of the hull loss.

What is the estimated loss for Air India?

In 2021, Air India declared the value of an eight-year-old Boeing 787 Dreamliner at around $115 million. Just like a car, the insured value of a plane also depreciates with age, leading to lower premiums in later years. This means that Air India is unlikely to get the entire value for the claim.

“This is a very large incident, and it will impact all types of policies that any carrier would buy. The airplane has been burned down and looks to be a total-loss scenario. A replacement is going to cost them a lot,” said Howden India’s Agarwal, adding that even so, the larger portion of the impact will be from “the liabilities that come attached to it”.

Hitesh Girotra, vice president of aviation and specialty lines at Prudent Insurance Brokers, explained that Air India’s liability will depend on multiple factors, such as the nationality of the passengers on board, which will define the minimum liability applicable as per the Montreal Convention.

“Since the aircraft crashed into a residential apartment, there is third-party property damage liability on the operator. There might also be loss of lives in that residential apartment where the aircraft crashed,” Girotra said.

Airlines have a liability to ensure the safe passage of fliers. Thus, any accident, whether it’s a bodily injury or loss of life, is the liability of the airlines to cover. Any damage to other properties due to an airplane is also the responsibility of the airline.

Also read: Will the Air India crash lead to the grounding of the Dreamliner series and disrupt travel?

What will be the impact on aviation sector premiums?

“We are talking about a loss which may actually be to the tune of $250 million–the liability and the hull value put together. This translates to about ₹2,100 crore, which is nearly 200% more than the ₹900 crore aviation premium collected by the industry during the year,” Agarwal said, adding that there will certainly be some upward impact on premiums for the sector and other aviation players even though it may not be immediate.

IBAI’s Bharindwal believes that while immediate premium adjustments are unlikely, the cumulative effect of multiple aviation incidents worldwide, including this one, will influence renewal terms and premiums for the sector in the next underwriting cycle.

“This incident, along with others in recent months, will likely result in a hardening of the aviation insurance market, not just for the airline involved, but across the entire aviation sector,” he said.

Is the risk premium higher for Boeing planes?

There are two large airplane manufacturers in the world—Airbus and Boeing. Owing to previous incidents involving its other models, Boeing has been losing market share. But the pipeline for both players in terms of fleet sales to India is robust.

The airplane model in question—the Boeing 787 Dreamliner—has not seen any crashes since it was introduced in 2011. However, it has faced a slew of recent incidents related to technical issues. Still, the 787 Dreamliner is largely considered relatively safer and is not incident-prone.

One incident is unlikely to change the reinsurance perspective for Boeing or this specific model, according to industry players. Also, once an aircraft is sold to a particular airline, the liability gets transferred to the buyer.

While any immediate impact on Boeing is not expected, the rising number of incidents could still result in higher premiums for the airplane manufacturer over a period of time through costlier renewals.

“It does add an incident for Boeing, and maybe in the long run, it might add up to some pricing impact,” Agarwal said, adding that it will have an overall impact on Boeing’s risk profile.