Along with rising losses and operating costs, National Aviation Company of India (Nacil), the entity that was formed after the merger of Air India and Indian Airlines, has paid a 15 % higher premium for its insurance cover in 2008-09.

The state-owned airlines, with a fleet of 147 aircraft with an insured value of $ 6.5 billion, has paid around Rs 95 crore as premium in 2008-09, against Rs 83 crore it had shelled out in 2007-08.

However, last year both the airlines had renewed their insurance cover separately. The premium for Nacil had shot up far, the renewal international aviation insurance market has become costly and both the airlines together had substantial claims in 2007-08. Against a premium of Rs 83 crore, both the airlines had claimed over Rs 130 crore in 2007-08.

This is also the first renewal where Nacil has paid higher premium as for last six years the company had witnessed a fall of 40-45% in insurance expenses every year. The cover for Nacil which begins on Tuesday has been provided by a consortium, led by public owned New India Assurance and reinsured by London based ACE

The insurance will be provided to the merged fleet of Air India, Indian (erstwhile Indian Airlines), Air India Express and Alliance Air, with a total of about 149 aircraft, including those expected to be delivered later in the year.

According to the official, there were two bids?one from the public sector insurance companies and the other from private insurance companies. The public sector consortium led by New India Insurance won the bid to cover the national carrier.

?The insurance will be for a year,? Jitender Bhargava, executive director with Air India said but he was not able to provide any more details on the deal.

The multi-billion dollar insurance cover, taken by Nacil that is essentially the holding company for the merged entity of the erstwhile Indian Airlines and Air India, is the highest insurance coverage by any airline company in the Indian sub-continent, sources said.

Air India?s 2007-08 insurance contract was with New India Assurance and ICICI Lombard General Insurance as co-insurer but whether the latter was still part of the deal is unclear. Last year, Air

India?s exposure value before the merger, was estimated to be around $3 billion covering around 60 aircraft. Now, as the total fleet has more than doubled, so has the coverage.

According to sources in the insurance sector, the airline company was getting a 15% discount on offered insurance rates for non-aviation business in 2008-09.

Three other public sector insurance firms including Oriental Insurance, United India Insurance and National Insurance also took part in the bidding. The private sector insurance companies that took part in the bidding included Bajaj Allianz General Insurance, Cholamandalam MS General Insurance and Reliance General Insurance.

These companies already cover air carriers like Jet Airways, Kingfisher and Deccan. The year-long insurance period will expire on June 30, 2009, Bhargav said.

The multi-billion dollar insurance cover, is the highest insurance coverage by any airline company in the Indian sub-continent, sources said.

In 2005, the national carrier placed an order worth $11.6 billion with Boeing for 68 aircraft of which 27 are Dreamliners. The first Dreamliner was initially scheduled for delivery by the end of this year, but the deliveries are now expected to be delayed till somewhere in 2009.

Official figures showed the market share of Indian Airlines has declined to 14.8% in the month of May from 15.1%. This despite the fact that public carrier is the largest in the country by fleet.