Insurance for flights
From BS:
Private carrier Kingfisher Airlines has had to pay around 37 per cent higher premium to renew its annual cover. And the fear of a similar increase has forced Air India — the state-owned airline that has sought government bailout as it is finding it tough to pay salaries — to defer renewal by three months.
Unlike Vijay Mallya-promoted Kingfisher, Air India’s insurance cover has a clause that allows it to extend renewal by up to three months.
Kingfisher, which is holding talks to raise funds due to mounting debt and losses, has paid over Rs 50 crore ($10.5-11 million, since the payment was in foreign currency) to insure 74 aircraft, as against around Rs 38 crore ($7.9 million) that it paid last year. The airline purchased a $3.09 billion (around Rs 15,000 crore) insurance cover from ICICI Lombard which was effective from June 24, said insurance industry sources.
Indigo’s annual cover is scheduled to come up for renewal on July 31. While National Aviation Company, which flies under the Air India brand, did not respond to a questionnaire e-mailed on Saturday, Indigo could not be reached for comment.
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Since January, there have been eight aviation-related claims, which have affected the market. Reinsurance rates are also hardening due to lower capacity in the market following financial problems at AIG and Swiss Re.
Insurance companies base their rates on computations of probability. If aircraft safety incindents in recent times had truly been independent, then these rates would not have changed. Since they have, there are hard-nosed money men out there who think that the chances of one plane crashing increases the chances of other planes also getting into trouble, ie, the incidents could be statistically correlated.
