Public sector general insurance companies along with their public sector counterparts are getting ready to bid aggressively for Air India’s $9 billion cover, coming up for renewal on 1 October in London.
Air India is up for renewing its 95% of insurance cover and all general insurers are placing their bids to get the contract. The state-run airline, which floated a global tender for the policy to cover its 126 aircraft, expects to buy the policy at a reasonable discount, given the increased number of underwriters and better risk management practices.
Insurers have to place their bids by September 7 and Air India expects its premium payout to fall because of soft reinsurance market and steep fall in fuel prices after the massive crash in crude prices since the middle of last year.
The company’s global tender posted on its website said, “Air India’s aviation insurance policies are due for renewal effective 1 October 2015 for an agreed fleet value of around $9 billion. The national carrier has invited technical bids in sealed envelopes from Indian insurance companies duly registered with IRDA (Insurance Regulatory and Development Authority of India).” Some of them have already initiated talks to form joint ventures to bid for the business, one of the executives said.
At present, AI has a cover from New India Assurance for a premium of $27 million, a company official told PTI.
“Despite a rise in volume in aviation insurance business in the country, the overall premia have fallen as the rates have remained soft in the global markets. Premium rates are softening in the international market as there were no major aircraft accidents except for disappearance of a Malaysia Airlines plane and Germanwings plane crash. Therefore, we are expecting a reasonable discount in the premium,” Martin Stevans, chief underwriting officer at Global Aerospace, a unit of AIG told Economic Times.
Air India, the national flag carrier, is surviving on a Rs.30,000 crore government bailout. The airline, which had a total debt of Rs.40,000 crore as on 31 March, is expected to be debt-free only by 2018-19.