Tata subsidiary joins insurance consortium to provide cover to Air India

Tata AIG will be part of the $12-billion insurance package for A-I

Within months of the Tata group taking over Air India, a subsidiary of the salt-to-software conglomerate has joined a consortium to provide insurance cover to the airline. With that, Tata AIG General Insurance Company will for the first time be associated with Air India for its cover.

The insurance cover, pegged at $12 billion (approx Rs 91,000 crore) will provide cover  to 141 aircraft (117 of Air India and 24 of Air India Express) as well as passenger liability among other things from April 1.

The insurance premium is expected to go up by 20 per cent for the airline due to the ongoing war in Ukraine and the subsequent hardening of the insurance premium rates globally, said a public sector insurance official asking not to be quoted. 

For the fiscal year ending March 31, Air India had paid Rs 258 crore for the cover taken from the public sector insurance companies, which in turn had re-insured the airline with foreign insurers. AIG of the United States is already providing reinsurance cover to the airline. Apart from the ongoing war, the air crash in China on March 21 had also contributed to rising insurance rates.

Tata AIG Insurance is a profit-making unlisted subsidiary of Tata Sons. The Tatas and AIG hold 74 per cent and 26 per cent stake, respectively, in the venture. The company reported gross direct premium income of Rs 8,042 crore and profit after tax of Rs  448 crore in FY2021.

Apart from Tata AIG, the other members of consortium to provide cover to Air India include New India Assurance Company, Oriental Insurance Company, United India Insurance and National Insurance Company. There’s some private presence too. For instance, ICICI Lombard is also part of the consortium, said a source close to the development. This would be the second time ICICI Lombard and any private player will provide cover to Air India. 

Earlier, it had provided cover to the airline in 2010.

The Indian insurance companies, however, retain only part of the premium and pass on the rest along with the risk to the international consortium so as to de-risk their own books. “Any accident usually results in a huge outgo. Take for example, in the Kozhikode Air India Express accident, the insurance companies gave Rs 700 crore as initial claim and more claims are still in process,” said the source.

An email to Tata group did not elicit any response.

Air India had insured its fleet for Rs 118 crore in the fiscal 2021 on a standalone basis as compared to Rs 158 crore paid in the previous fiscal ending March 2020.

The airline received a refund of $10 million (about Rs 76 cr) for FY2021 after the pandemic-led lockdowns across the world and grounding of aircraft.