A series of major and minor incidents have contributed to the rise in insured losses
A series of air-crash incidents have led to insurers incurring a loss of Rs 2,500 crore in India's aviation sector. These incidents include both major and minor instances in the Indian air space.
Industry sources said the period 2014 to 2019 has been one of the worst five-years for the aviation insurance segment.
The size of the Indian aviation insurance market is estimated to be around Rs 5,000-6,000 crore.
Aviation insurance provides coverage for hull (aircraft) losses as well as liability for passenger injuries, environmental and third-party damage caused by aircraft accidents.
Depending on the type of company, there are various type of aviation insurance products available in the market. These include insurance for the crew members, passengers, spares (aircraft equipment), hull all risk cover for any damage to the aircraft.
For small aircraft flying passengers for business or leisure, there are niche aviation insurance covers available for loss of life and aircraft damage. Helipads are also eligible for insurance cover under this category.
Depending on the size of the cover, the premium range from 0.002 percent to 0.004 percent of the sum assured. There is a revision in annual premiums depending on the claims in the previous fiscal.Rise in air accidentsIn India, the past few incidents include damages to aircraft parts of Jet Airways and SpiceJet in separate incidents, apart from a Su-30 fighter jet crash and KingAir C-90 crash among others have led to losses of around Rs 2,500 crore.
The Sukhoi Su-30 crash in July 2018 had led to insurance losses of Rs 250 crore. New India Assurance, which is the country’s largest aviation insurer, was liable to pay the losses.
The Chennai floods in December 2015, when several aircraft and private jets belonging to companies were damaged, led to insurance losses of Rs 400 crore.
Due to a rise in the air-crashes and airline damages due to flights skidding from the runway, there has been a cumulative increase in risk rating for airlines.At the time of renewal of insurance policies, this risk rating is taken into account. Higher the risk rating (directly proportional to past claims), greater is the insurance premium applicable. Re-insurers who provide risk cover to insurers against large risks like aviation also increase premiums when there are higher claims.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.