Insurance firms to shell out Rs.400 crores for Air India towards Mangalore Crash

Insurance firms are already feeling the heat with the national carrier, Air India, and relatives of the passengers who died in the ill-fated Mangalore air disaster set to claim compensation worth hundreds of crores of rupees in the coming days.

It is estimated that insurers may have to collectively shell out compensation claims to the tune of Rs 350-400 crore for loss of 158 human lives and the total destruction of the Boeing 737-800 aircraft that crashed.

The Air India (AI) Express aircraft was provided a comprehensive insurance coverage by four private sector general insurance companies led by Reliance General Insurance Co Ltd and co-insured by HDFC Ergo, Bajaj Allianz and Iffco Tokio. The entire AI fleet of 136 aircraft was insured for a total of $8.59 billion at an annual premium of around $24.3 million.


Industry experts say that AI will make insurance claims of at least Rs 300 crore as damages and another Rs 100 crore for passenger and cargo compensation claims.

According to the international Montreal convention for accident compensation treaty, which has 95 signatories including India, victims of an air disaster can claim Rs 75 lakh per passenger from the airline, Raju Desai, director of Raju Krishna insurance brokers, said.

AI on Sunday evening announced Rs 10 lakh as interim compensation for the victims. This compensation amount is a pittance compared to the conditions stated under the Montreal convention. The victims can sue the airlines for gross negligence and human error. There is bound to be a long bitter legal battle ahead both for the airline and the private insurance company, admits an insurance official.

Meanwhile, private insurance companies who are part of the consortium said that the insurers had transferred the majority of the risk to re-insurers based in London and to the general insurance corporation( GIC) of Mumbai which has around 14% of the reinsurance portfolio.

‘‘We will suffer only a loss of around Rs 5-7 crore as we have re-insured this aviation portfolio,’’ an insurance official who was part of the consortium said. A senior GIC official said that they may incur a loss of around Rs 15 crore.

Industry experts say that it will be interesting to see how the consortium of private sector insurance firms will settle the damage.