State-owned New India Insurance, along with other three general insurance companiesUnited India, Oriental Insurance and National Insurancehave bagged the bid for becoming primary insurers for the prestigious Air India account.
Private sector ICICI Lombard General Insurance, which was the primary insurer for Air India in 2010-11 and lost the bid for 2011-12, has received a 20% share in the deal as a part of conditions set by Air India. International reinsurer Chartis is the leader in the reinsurance deal.
Primary insurers pass on more than 95% of the risk of the carrier to reinsurers. Reinsurers and the primary insurers just front the deal.
Air India's insurance cover provides $1.5 billion for any possible single claim out of a wide body aircraft while the amount is $750 million for narrow body aircraft.
Air India is the second Indian airlines after Vijay Mallya-owned Kingfisher whose insurance premium has fallen in 2010-11. Kingfisher had paid around $14 million for covering 70 aircraft.
Sources said Air India's premium in 2010-11 had gone up due the claims out of Mangalore Crash. Air India has been settling over $100 million against Mangalore crash in which 156 passengers, along with the crew, died.
Sources point out that many domestic general insurers like Reliance General and Iffco Tokio General Insurance are scaling down their capacities. Air India, while inviting bids for its insurance renewal in 2011-12, had stipulated that the selected insurers have to pay R35 crore from their own kitty without waiting for the reinsurance settlement within seven days of any occurrence of a claim. Air India had to put down a clause on the mandatory payment from the insurance companies as it had a tough time settling the claims for the Managalore crash when Reliance General was the primary insurer.