Insurers face Rs 450-crore hit

BS REPORTER / Mumbai May 23, 2010, 23:39 IST (Business Standard)

Private insurers led by Reliance General are expected to take a hit of around Rs 450 crore from the Air India Express plane crash in Mangalore. The companies had earned a premium of around Rs 110 crore from Air India this year.
This was the first time that private insurance companies had provided a comprehensive cover to the country's national carrier. Earlier, public sector players led by New India Assurance provided the cover.
Apart from Reliance General, HDFC Ergo, Iffco Tokio and Bajaj Allianz were part of the consortium. Like any large risk, the general insurance companies had reinsured the risk, with Sumitomo being the lead reinsurer, a first for the company. ICICI Lombard had also participated as a reinsurer.
Insurance industry sources said that the claim would arise from both hull and liability cover taken by the airline. Insurers and reinsurers are likely to see a claim of $90 million to $100 million (Rs 395 to 450 crore). The crash would lead to a hull loss of $50 million (Rs 225 crore). Though payout towards liability depends on the profile of the passengers, industry sources said it could be of the order of $40 million (Rs 180 crore).
When asked to comment, a company spokesperson said: “The Reliance General-led consortium is the insurer for Air India’s fleet of aircraft. However, as a policy, we do not comment on individual policy details or specific customer claims.”
Apart from the private players, General Insurance Corporation, the designated Indian reinsurer and the world’s fifth largest player in the aviation space, is also likely to face a hit. It had reinsured 14 per cent of the risk of $8.59 billion (around Rs 39,000 crore), while ICICI Lombard’s share was 3 per cent. A senior GIC executive said that the reinsurer's liability from the accident will be around $6 million (around Rs 27 crore).