Reinsurers pay $125 million to Air India for hull, engine loss in Ahmedabad air crash

The Ahmedabad-London Gatwick flight AI-171, operated by Air India using a Boeing 787 Dreamliner, crashed near Ahmedabad, killing 260 people, including 241 passengers. The aircraft was completely destroyed.

The initial claim amount of $125 million includes $80 million for the hull and another $25 million for two engines.

A reinsurer, who participated in the Air India deal, said, “The aircraft had just undergone an engine maintenance exercise and had a new engine for a temporary period while the old engine was getting serviced. That old engine will now be the property of reinsurers who had insured Air India and they can recover some money by selling that engine.’ All the claims for the hull and engines have been settled. Only passengers’ claims are pending.”

Air India did not respond to an email from The Indian Express seeking clarification on the status of compensation.

Air India’s total claim out of the Ahmedabad crash is one of the largest in the history of aviation insurance. The airline had renewed its mega $20 billion insurance policy (for hull) and $1.5 billion liability policy with multinational AIG as the lead reinsurer since April 1.

Almost 95 per cent of the Air India policy has been reinsured with a clutch of reinsurers led by AIG, Axa and Allianz. Among the primary insurers, Tata’s general insurance subsidiary Tata AIG General Insurance was the leader with over 40 per cent share in the policy followed by state-owned New India Assurance and other PSU and private sector general insurers.

However, the outgo from the primary general insurers will be minimal as the AI insurance policy has been reinsured by almost over 95 per cent who will be now paying claims.

The settlement of liability claims will take some time as it involves complex processes, including litigation in Indian and overseas courts. Liability claims will cover passenger deaths, crew losses, and third-party damages. The liability portion also includes compensation for individuals affected on the ground and will be governed by international frameworks such as the Montreal Convention, which allows for unlimited compensation in cases of proven airline negligence.

Of the 230 passengers on board, 169 were Indians, 53 British, seven Portuguese and one Canadian. The other 12 people on board were two pilots and 10 crew members. Only one passenger survived the crash.

Both the airline and the families of those who died in an air crash are generally entitled to compensation, even when pilot error is involved, according to industry experts. In fact, the compensation amount could potentially increase if negligence by maintenance staff or technicians is established, sources said. The exact compensation and legal proceedings vary depending on the jurisdiction and whether the flight was domestic or international.

Airlines typically maintain liability insurance that covers passengers or their families in the event of injury or death, regardless of whether the cause is pilot error, mechanical failure, or other factors like pilot suicide.

For domestic flights within India, compensation is governed by national regulations such as the Carriage by Air Act and guidelines set by the Directorate General of Civil Aviation (DGCA), which ensure that passengers or their families are compensated regardless of who is at fault. In cases where foreign nationals are among the deceased, families have the option to file claims in jurisdictions such as the country of the carrier, the place where the ticket was purchased, or the home country of the victim. Since nationals from Britain, Canada and Portugal were among the victims, legal proceedings in international courts are likely.