The sudden cancellation of Air India?s earlier brief to insurers for renewal of its insurance cover has stumped the domestic and international insurance market.
Cash-strapped Air India, which doesn?t have money pay its employees, has to pay much higher price than what it would have paid if the original plan to place the deal would have been varied out.
Air India has to pay a higher premium as the global aviation insurance market has hardened up substantially after the Air France mishap in the first week of June.
Air India, after canceling its original mandate to the insurers, has once again asked the insurers to face technical bid, which will be submitted by June 24.
Two consortiums belonging to private and public sector has been providing insurance covers leads the public sector consortium while ICICI Lombard is the leader for the private sector consortium.
For 2009-10 renewal also, Air India chose these two consortiums after a proper technical bid.
The national carrier had asked these two consortiums to get ready for the pricing bids. Normally, the entire aviation insurance sector is reinsurance-driven and leading reinsurers in the London market determine the pricing on a competitive basis.Over 90 % of the Air India insurance cover is reinsured in the London market.
While top officials of insurance companies and Air India were getting ready to visit London market to get pricing quotes for the deal, which should have been finalised by June 4, Air India had suddenly asked the companies not to go for financial bidding and also cancelled the earlier technical bidding.
Industry sources point out that Air India was keen on involving some other players in the deal which was not possible for the insurers at the last moment.
When contacted, AI officials refused to comment on the issue. Global aviation insurance market has flared up forcing the Kingfisher Airlines to cough of 35% more premium.