Tata AIG General Insurance and other insurance companies have won the contract to insure the fleet of Air India and its subsidiary Air India Express for $10 billion. The airline will pay a $30 million (Rs 246 crore) premium for the fiscal year beginning April 1 – the same as in the previous fiscal year.
Tata Sons, the new owner of the airline, has appointed its own subsidiary Tata AIG General Insurance, a joint venture with AIG of the United States, as the airline’s “lead insurer” by giving it a larger share of insurance premiums than New India Assurance, the previous leader of the consortium. When compared to the other consortium members, the leader will receive a larger share of the premium (around 36% of the premium) and will also bear a greater risk.
The airline was able to secure affordable insurance for the entire fleet despite the conflict in Ukraine. Due to its plans to purchase additional aircraft during the current fiscal year, the airline has increased its insurance coverage to $10 billion from $8 billion for the fiscal year ending in March 2023. The 140 aircraft of Air India and the 26 narrow-body aircraft of Air India Express will both be covered by insurance.
Other insurers in the consortium, in addition to Tata AIG and NIA, are GIC Re, United India Insurance, Oriental Insurance Company, and ICICI Lombard General Insurance. Local insurance companies, according to international practise, will pass on 95% of the premium and risk to foreign reinsurers. AIG is a major player in the aviation reinsurance industry.
The airline has ordered 470 new planes, and insurance coverage will be determined based on the delivery schedule over the next few years. The airline also has the option of purchasing another 370 planes, bringing the total order size to 840 planes. Furthermore, the merger of AirAsia India and Air India Express, as well as Air India and Tata SIA, gives the Tatas more bargaining power.
“Air India is merging with Tata SIA Airlines, which will help the airline negotiate a better deal with insurance companies in the future as more aircraft are added to the cover.”
Tata SIA Airlines, which operates under the Vistara brand, has 54 aircraft in its fleet.
Air India has added a few aircraft on lease to its 2023-24 renewal policy, increasing the sum assured to $10 billion.
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