Tata AIG General Insurance and other insurance companies have been awarded the contract to provide $10 billion in insurance coverage to Air India and its subsidiary Air India Express.
The airline will pay a $30 million (Rs 246 crore) surcharge for the fiscal year beginning April 1 — the same as the previous fiscal year.
Tata Sons, the airline's new owner, has appointed its own subsidiary Tata AIG General Insurance, a joint venture with AIG of the United States, as the airline's "lead insurer" by giving it a larger share of insurance premiums than New India Assurance, the previous leader of the consortium.
When compared to the other members of the consortium, the leader will receive a larger portion of the premium (about 36% of the premium) and will also bear a greater risk.
According to an industry insider, despite the turmoil in Ukraine, the airline was able to get favourable insurance rates for its whole fleet.
Air India intends to acquire more aircraft in the current fiscal year, therefore it has upped its cover to $10 billion, up from $8 billion for the fiscal year ending March 2023. The insurance would cover Air India's 140 aircraft as well as Air India Express's 26 narrow-body aircraft.
Other insurers in the consortium include GIC Re, United India Insurance, Oriental Insurance Company, and ICICI Lombard General Insurance, in addition to Tata AIG and NIA. According to international practice, local insurers will pass on 95% of the premium and risk to overseas reinsurers. AIG is a major player in the aviation reinsurance business.
An email sent to Tata and Air India received no response.
The airline has purchased 470 new planes, and insurance coverage will be determined based on the delivery timetable over the following three years. The airline also has the option of purchasing another 370 planes, bringing the total order size to 840 jets.
Furthermore, the combination of AirAsia India and Air India Express, as well as Air India and Tata SIA, gives the Tatas additional bargaining leverage.
Air India has placed a few aircraft on lease under the 2023-24 renewal policy, increasing the policy's value promised to $10 billion.
The airline said on Thursday that it has onboarded over 3,800 personnel across crew and other sectors, and has implemented over 29 new employee policies in the previous six months as part of its five-year transformation strategy.
Air India will invest $200 million in information technology systems and $400 million in entirely refurbishing current planes.