Tata AIG General Insurance and other insurance companies have won the mandate to provide insurance cover worth $10 billion to Air India and its subsidiary Air India Express fleet. The airline will be paying a premium of $30 million (Rs 246 crore) for the financial year beginning April 1 -- same as the previous financial year.
Tata Sons, which is now the new owner of the airline, has picked up its own subsidiary Tata AIG General Insurance, a joint venture with AIG of United States, as the "lead insurer" for the airline by giving it a larger share of insurance premium as compared to New India Assurance -- the previous leader of the consortium. The leader will take home a higher share of the premium (around 36 per cent of premium) and also take a higher risk when compared to other members of the consortium.
An industry source said, despite the war in Ukraine, the airline managed to get good insurance rates for its entire fleet. Air India is planning to add more aircraft in the ongoing financial year and hence it has increased its cover to $10 billion as compared to $8 billion cover taken for the financial year ending March 2023. The insurance cover will be provided to Air India's 140 aircraft and Air India Express' 26 narrow-body aircraft.
Apart from Tata AIG and NIA, other insurers in the consortium are GIC Re, United India Insurance, Oriental Insurance Company, and ICICI Lombard General Insurance. According to international practice, the local insurance companies will pass on 95 per cent of the premium and risk to the foreign reinsurers. AIG is one of the largest players in the aviation reinsurance market.
An email to Tata and Air India did not elicit any response.
The airline has ordered 470 new planes and the insurance cover will depend on the delivery schedule over the next few years. The airline also has the option to buy another 370 planes thus taking the order size to 840 planes. Besides, the merger of AirAsia India and Air India Express and Air India and Tata SIA is giving more negotiating power to the Tatas.
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“Air India is undergoing a merger with Tata SIA Airlines which would help the airline to negotiate a better deal with the insurance companies in future as more aircraft will be added to the cover,” said a source close to the development. Tata SIA Airlines, which operates under the Vistara brand, has a fleet of 54 aircraft.
In 2023-24 renewal policy, Air India has added a few aircraft on lease and hence its sum assured of the policy has gone up to $10 billion.
