Air India Dreamliner Insurance Cover Raised After Engine Change
Air India increased the insurance coverage for its Boeing 787-8 Dreamliner from Rs 750 crore to Rs 850 crore during the policy renewal in April 2025. This hike followed the replacement of the aircraft’s engine, according to industry sources. The recent crash of this plane near Ahmedabad has led to expected total insurance claims of approximately Rs 1,500 crore.
Indian insurers, led by Tata AIG General Insurance, are expected to cover only Rs 100-150 crore of the payout. The majority of the risk has been transferred to global reinsurers operating out of London and Bermuda.
Details of the Crash and Its Financial Implications
The flight, bound for London’s Gatwick, crashed last week, resulting in the loss of 270 lives, including 241 passengers and crew onboard. Passenger compensation claims are anticipated under the Montreal Convention, which entitles the families of deceased passengers to around Rs 1.8 crore each. This alone could push the total liability beyond Rs 420 crore.
Additionally, the crash is expected to trigger substantial third-party claims. Industry experts suggest this event could lead to a tightening of the global aviation insurance market, especially for wide-body aircraft operators in Asia, as this is the first major wide-body crash in the region.
Insurance Structure and Risk Distribution
- The Dreamliner’s insurance was part of a fleet-wide cover valued between Rs 8,000 and Rs 10,000 crore.
- Air India paid an annual premium of roughly Rs 250 crore for this policy.
- Tata AIG General Insurance led the policy, with Indian co-insurers including GIC Re, United India, Oriental Insurance, National Insurance, and ICICI Lombard.
- Over 90% of the risk was reinsured by global players such as AIG and AXA XL.
- Indian insurers retained about 7.5-10% of the total exposure, amounting to Rs 100-150 crore.
The hull loss alone, based on the aircraft’s age-adjusted insured value, is estimated at Rs 850 crore, as the Dreamliner was declared a total loss.
Regulatory Response and Claims Processing
The Insurance Regulatory and Development Authority (IRDA) has directed all insurers involved to submit weekly updates on claim settlements starting from June 16, 2025. A circular issued on June 14 mandates companies to expedite payouts under life and personal accident policies.
Requirements such as FIRs (First Information Reports) and postmortem reports have been waived to facilitate faster claim settlements. Insurers have also been instructed to appoint nodal officers to manage claims efficiently.
What Insurance Professionals Should Note
- The increase in insurance coverage following mechanical changes like engine replacements highlights the impact of fleet modifications on risk assessment and premium adjustments.
- Risk cession to global reinsurers remains a critical strategy in managing large-value aviation risks, limiting exposure for domestic insurers.
- Regulatory bodies are actively monitoring claim settlements to ensure timely and fair compensation, underscoring the importance of compliance and efficient claims management.
- The crash may influence global aviation insurance pricing, especially for operators in Asia, signaling potential shifts in underwriting approaches.
For insurance professionals interested in deepening their knowledge about risk management and claims handling in aviation or other high-value sectors, exploring specialized courses can be beneficial. Resources like Complete AI Training's insurance-related courses offer practical insights and skill development opportunities.
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