Indian aviation & insurance

Jan 22 2008, 17:25 IST
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SummaryTHE Aviation Sector in India is making headlines these days not only owing to the glamour attached to the industry...

THE Aviation Sector in India is making headlines these days not only owing to the glamour attached to the industry but also due to the significant spurt in growth of passenger traffic. Aircraft acquisitions are happening at a pace that was unexpected even in the wildest of imagination a couple of years back. Earlier, infrastructural constraints were part of economic dis-cussions but stories of aircrafts hover-ing for 30 minutes before getting a landing slot at metros are now a reg-ular occurrence.

Following Jet Airway’s takeover of Air Sahara, we now have yet another merger, of Air India and Indian, creat-ing a new behemoth which would emerge as a force to reckon with in the regional market. International pas-senger growth, too, is expected to be in double digits for the merged entity with domestic passenger growth pegged at higher than that for the in-ternational passenger traffic at least for the next 5 years. Such a merger usu-ally results in better bargaining power in the hands of the merged entity vis-à-vis the insurance industry. But then, on the other side, merged operations, owing to economies of scale, create greater focus, concentration of re-sources and expertise resulting in im-proved risk management culture and concomitant improved loss experi-ences and expectancies.

National Aerospace Laboratories is also perhaps ready with plans to launch India’s first indigenously built 70-seater civilian aircraft by 2015. In-dia Post emboldened by the competi-tive pressures from the private courier companies opts for wet leasing of an aircraft. Not to be left behind, corpo-rates are in a race to acquire aircraft, particularly business jets which now also fly over European and American skies. Flying into and over these coun-tries require higher insurance covers as regards third party liability limits are

concerned.

While growth in country’s aviation sector is now common knowledge, what is not equally well known by the observers is the fact that GIC of India has emerged as a significant aviation (re)insurance underwriter in the years following WTC oss. Among the fra-ternity of about 40 underwriters worldwide, GIC of India perhaps ranks statutory cessions of 5% on each and every policy of Indian airline operators for all types of insurance covers while simultaneously offering significant ca-pacities for major airlines of the world. On the general aviation side, GIC Re capacities are INR 50 crore for hull and USD 150 Mln for liability. This high liability limit facilitates absorption of liability limits of the business jets

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