Ahmedabad Plane Crash: India’s most expensive aviation claim expected as Air India battles Rs...

The recent crash of an Air India aircraft shortly after taking off from Ahmedabad airport on Thursday is expected to become India’s most expensive aviation insurance claim. Experts estimate the potential financial impact to be between USD 211 million and USD 280 million, which roughly translates to Rs 2,400 crore at the higher end. This tragic incident involves not only the total loss of the aircraft but also fatalities and damage to third-party property, triggering various parts of the airline’s aviation insurance policy. These policies usually cover risks such as damage to the aircraft (also called “hull damage”), spares, and legal liabilities to passengers and other third parties. According to Amit Agarwal, CEO and MD of Howden India, the aircraft in question, a Boeing Dreamliner (VT-ABN) delivered in 2013, was insured for about USD 115 million in 2021. Depending on its configuration and age, a Dreamliner can be valued between USD 211 million and USD 280 million. He explained that if the damage is confirmed to be total, the insurer would pay the value declared in the policy.

In addition to basic coverage, airlines often have add-on war risk insurance, which applies if the crash is caused by terrorism or war-related incidents. Whether this applies will depend on the findings of the investigation.

One of the biggest financial burdens from this crash is likely to come from the liability section of the insurance. This covers the airline’s legal responsibility to passengers and third parties, including medical expenses, lost baggage, and property damage. The aircraft crashed into a civilian compound, which may result in significant third-party claims, making the overall compensation much higher.

Narayanan, another expert quoted in the report, explained that such large losses usually involve multiple reinsurers, since aircraft insurance is spread across many parties to manage risk. The exact financial impact on the insurance market will take time to assess, as liability claims are often delayed and complex.

As per international law, the Montreal Convention of 1999, which India signed in 2009, will determine the final compensation for passengers. Compensation is calculated using Special Drawing Rights (SDRs), which were valued at around USD 1.33 per SDR as of October 2024. The standard limit under this convention is 128,821 SDRs per passenger, though higher compensation can be claimed depending on circumstances and legal proceedings.

Meanwhile, the Tata Group, which owns Air India, has announced an interim compensation of Rs 1 crore to the families of each deceased passenger.

Experts believe this accident could significantly impact the aviation insurance market in India, which currently has an estimated annual premium pool of Rs 900 crore. While much of the loss will be reinsured internationally, the event may lead to increased insurance premiums for Indian airlines in the near future.