AI 171 tragedy: Crashed Air India plane’s insurance was hiked by Rs 100 crore in April; total claims could hit $475m, say GIC Re

KOLKATA: Air India had enhanced the insurance cover for the Boeing 787-8 Dreamliner that crashed in Ahmedabad, from Rs 750 crore to Rs 850 crore, during its renewal in April 2025. This came following an engine replacement on the plane, say sources.

Total insurance claims from the crash are expected to be around Rs 1,500 crore. Indian insurers led by Tata AIG are likely to bear only Rs 100-150 crore of the payout, having ceded most of the risk to global reinsurers. The AI flight to London's Gatwick crashed last week, killing as many as 270 people, including 241 on board.

The crash is expected to trigger passenger compensation under the Montreal Convention, which means families of deceased passengers are entitled to about Rs 1.8 crore each, pushing the total liability above Rs 420 crore. The crash may also result in significant third-party claims. Experts said this is likely to harden the global aviation insurance market, especially for wide-body aircraft operators in Asia. This was the first major crash involving a wide-body aircraft in the region.

The Boeing aircraft's insurance was part of a fleet-wide cover of Rs 8,000-10,000 crore, for which Air India paid an annual premium of around Rs 250 crore.

The aviation policy is led by Tata AIG General Insurance, with participation from Indian co-insurers like GIC Re, United India, Oriental Insurance, National Insurance and ICICI Lombard. Over 90% of the risk is reinsured with global players including AIG, AXA XL and others in London and Bermuda markets.

Sources said Indian insurers have retained only about 7.5-10% of the exposure, translating to Rs 100-150 crore. The remainder will be met by foreign reinsurers. The hull loss alone — based on the aircraft's age-adjusted insured value — is pegged at Rs 850 crore, as the Dreamliner has been declared a total loss.

The crash is also expected to trigger passenger compensation under the Montreal Convention. Families of deceased passengers are entitled to about Rs 1.7 crore each, which could push the total liability above Rs 420 crore. Additionally, the crash may result in significant third-party claims. Experts said this is likely to harden the global aviation insurance market, especially for wide-body aircraft operators in Asia. This was the first major crash involving a wide-body aircraft in the region.

Meanwhile, IRDA has directed all insurers involved in the matter to submit weekly updates on claim settlements starting June 16. In a circular issued on June 14, the regulator also asked companies to expedite payouts under life and personal accident policies, and to waive requirements like FIRs and postmortem reports. Insurers have been instructed to appoint nodal officers to handle claims.