The recent tragic crash of Air India’s Boeing 787 Dreamliner near Ahmedabad may become the costliest aviation insurance case in Indian history. As per early estimates, the total insurance claim may go over $120 million (Rs.1000 crore), making it a record-breaking claim in the Indian aviation sector.
This crash involved Air India flight AI-171, which had 241 people on board, including many high-profile international passengers. Sadly, all passengers and crew members lost their lives, along with several people on the ground.
Aircraft Loss and Passenger Compensation Will Push Claim Higher
Breakdown of Estimated Payout:
- Aircraft Hull Loss: Approx. $80 million
- Passenger and Third-Party Compensation: Around $30–$50 million
- Total Claim Estimate: $120–$130 million (Rs.1000 crore) or more
In this case, the entire aircraft was destroyed, and the compensation to families is expected to rise, especially under global aviation rules like the Montreal Convention.
What Is the Montreal Convention and Why Is It Important?
India is a signatory of the Montreal Convention 1999, which outlines the compensation amount to be paid to passengers and families in case of international air accidents. As per this rule:
- Airlines must pay up to 1,28,821 Special Drawing Rights (SDRs) per deceased passenger.
- With 1 SDR valued at around $1.33, the payout per passenger could reach Rs.1.43 crore.
- If the airline is found negligent, courts can order additional compensation.
Insurance Companies Involved in the Air India Coverage
The main insurance provider for this aircraft was Tata AIG, supported by other Indian players like:
- New India Assurance
- National Insurance
- Oriental Insurance
- United India Insurance
- ICICI Lombard General Insurance
However, most of the risk is reinsured internationally, particularly in the London market, through what is called a Global Reinsurance Program.
Government reinsurer GIC Re holds a small 5% share in this risk pool. Indian insurance companies together hold less than 10% of total risk, so the financial hit will mainly impact global insurers.
Air India’s Global Fleet Insurance Program
Air India has insured its fleet under a global $20 billion aircraft insurance program, which is split across two parts:
- Hull Insurance: Covers damage or total loss of the aircraft
- Liability Insurance: Covers compensation to passengers and any third-party damage (e.g. people on the ground)
The destroyed aircraft (registration VT-ABN) was a 2013 Boeing 787-8 model. Its insurance value was recorded as $115 million in 2021, though its actual market value could range between $211–$280 million depending on age and maintenance.
Compensation Per Passenger: What Can Families Expect?
As per industry estimates:
- Base compensation can go up to $250,000 (Rs.2.08 crore) per passenger for death or injury.
- The Montreal Convention amount of Rs.1.43 crore is the minimum payout if negligence is not proven.
- Additional payouts can be ordered based on passenger income, age, family background, and dependents.
Air India has already announced an initial compensation of Rs.1 crore per victim’s family, which is just preliminary relief and not the full insurance payout.
How Will the Compensation Be Paid?
Insurance experts explained that:
- The total claim will be shared among many insurers and reinsurers globally
- Each insurer will bear a percentage of the payout as per the agreement
- Indian insurers like Tata AIG may face minor financial impact, while global reinsurers will carry the bulk
This structure helps reduce the risk on any single company, but a case of this scale affects the entire global aviation insurance market.
Past Indian Aviation Claims Were Smaller
This Air India crash is now set to become India’s biggest aircraft insurance payout. In comparison:
- In 2010, the Mangalore crash of an Air India Express Boeing 737 claimed 158 lives, with an estimated payout of $70 million
- In 2020, the Kozhikode crash caused 21 deaths and triggered claims worth around $60 million
These earlier incidents, though tragic, did not involve such a high-value aircraft or such a large passenger compensation estimate.
Will This Accident Change Indian Aviation Insurance?
Experts believe that this case will impact future premiums and may lead to tighter regulations in how airlines insure their fleets. With claims running into hundreds of crores, insurance companies will re-evaluate their risk-sharing mechanisms.
Sourav Biswas, Aviation Head at Alliance Insurance Brokers, stated that this is likely to become the largest insurance claim ever by an Indian airline.
