Insurance cos to bid jointly for Air India cover

Public and private sector insurance companies are forming alliances to bid for state-run carrier Air-India's aviation cover worth $3.5 billion.

To counter intense competition and get better rates from reinsurers, public sector insurance majors "" New India Assurance, Oriental Insurance, United India Insurance and National Insurance "" have decided to float a consortium to bid for Air-India's cover.

Private insurers are considering a similar alliance which will include Bajaj Allianz and ICICI Lombard.

Air-India has invited technical bids for aviation insurance for its aircraft fleet worth $3.5 billion this year, against $3.2 billion last year. The government-owned airline currently has 48 aircraft, the largest fleet size since its inception.

M Ramadoss, chairman and managing director, Oriental Insurance Company, said the consortium would share the risk equally. "We will be submitting our technical bids shortly, after which we will have to submit quotes for financial bids," he added.

A senior Bajaj Allianz official said, "We will see the strategy of the public sector companies and then decide. However, we may form a consortium with other private players and submit one bid."

Ninety per cent of aviation liability policies are reinsured in the London reinsurance market, where the risks are shared by reinsurers. The risk-sharing keeps the market on even keel, an industry expert said.

There are also a few lead reinsurers like Zurich based Swiss Re and US-based Wellington Re with large capacities, technical expertise and the ability to mobilise funds to dictate the terms and conditions, an industry expert said.

The aviation cover consists of aviation hull and spares liability policy, hull war cover, policy deductible cover and war excess liability cover.

Meanwhile, private general insurance company Cholamandalam has bagged the mandate for providing non-aviation insurance to Air-India. The non-aviation cover includes buildings, workshop equipment, infrastructure facilities and other ground support machinery.

The scope of the non-aviation cover is at least 25 per cent more in the context of the airlines' capacity augmentation programme, but the premium quoted by Cholamandalam was 25 per cent less than the last mandate, a source said.

Last year, the non-aviation mandate went to ICICI Lombard.