Multi-crore payout: Why Air India's Ahmedabad crash could be India's costliest aviation tragedy

Air India has its fleet covered under a comprehensive $20-billion global aviation insurance programme, which includes both hull insurance (covering aircraft damage) and liability insurance (covering passenger and third-party claims).

In what is being described as one of the deadliest aviation disasters in India, a London-bound Air India Flight 171 crashed shortly after takeoff from Ahmedabad International Airport on June 12, killing all 241 people on board. The aircraft also crashed into a doctors’ hostel near the airport, leading to additional fatalities on the ground.

Air India has announced Rs 1 crore in compensation for the families of each of the deceased. However, a CNN-News18 report citing experts say the financial toll is expected to go far beyond interim payouts, with total insurance claims likely reaching as high as Rs 1,000 crore.

Under the Montreal Convention of 1999, to which India has been a signatory since 2009, airlines are held liable for compensation in cases of passenger death or injury. As per the Convention, carriers must pay up to 128,821 Special Drawing Rights (SDRs) (approximately $1.33 per SDR as of October 2024) per passenger regardless of fault. Additional compensation may be granted if negligence is proven.

Speaking to PTI, Amit Agarwal, Managing Director and CEO of Howden (India), noted that final compensation will be based on the Convention, and the actual amount payable will depend on the insurance coverage Air India had secured.

The ill-fated Boeing 787-8 Dreamliner was carrying 242 passengers and crew members, including 169 Indian nationals, 53 British citizens, one Canadian, and seven Portuguese passengers.

Air India has its fleet covered under a comprehensive $20-billion global aviation insurance programme, which includes both hull insurance (covering aircraft damage) and liability insurance (covering passenger and third-party claims).

Agarwal explained that aircraft damage falls under hull all-risk insurance and would be based on the declared insured value of the aircraft. The aircraft involved (VT-ABN), a 2013 model Dreamliner, was reportedly insured for around $115 million in 2021. The valuation for similar aircraft typically ranges from $211 million to $280 million, depending on age and configuration.

Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), told PTI that such aviation insurance programmes are typically structured on a fleet-wide basis, with global reinsurance support from markets like London and New York. Risks are shared widely across many reinsurers, with no single entity holding a majority share.

“It’s too early to determine the total liability, including passenger and third-party claims, but the burden will be globally distributed,” Bharindwal said.

While hull insurance covers the aircraft itself, the costliest part is expected to come from liability insurance, given the number of lives lost and the additional damage caused on the ground.

Experts point out that compensation amounts depend on various factors, including the age, employment, education, and dependents of the deceased passengers. Claimants must provide proof of the actual damages suffered, making each case unique.