May 14, 2014: There would be no purchase preference support according to the Finance Ministry for public sector insurance companies.

Bids have been invited from Indian companies by Air India Wednesday for renewal of insurance for its 105-aircraft fleet which is worth a huge nine billion US dollars. It is even in the process of obtaining the rest 13 of the 27 Dreamliners that it has ordered.

According to officials of the national carrier, the invited bids from Indian insurers, as a consortium or on stand-alone basis, would have to be submitted by 4^th June. They added that the process to firm up the companies has begun which would offer the insurance cover to the fleet. The fleet is due or renewal from October 1^st.

Two consortia – a grouping of Oriental Insurance, New India Assurance (as the lead insurer), United India Insurance & National Insurance and HDFC Ergo General Insurance, ICICI Lombard & SBI General Insurance, had bid two years ago for the insurance coverage of the airline's fleet.

It has been cleared by the Finance Ministry that no purchase preference support would be given to public sector insurers for providing a level-playing field to their private counterparts who bid for Air India's fleet. The 105-aircraft fleet would get the coverage for hull all risk, aviation risk and hull war risk among other areas. For the risks involved in the sector and operation of aircraft, Aviation insurance coverage is geared specifically.

Such insurance policies are different on various counts from those for other areas of transportation. Any damage to the body of the aircraft due to an accident comes under Hull risk insurance. War risk insurance offers coverage for damage due to acts of war such as insurrection, invasion, hijacking and rebellion. Damage due to weapons of mass destruction is also covered by some policies which is commonly used in aviation and shipping industries.

After the September 11, 2001 terror strikes, war risk insurance policies were cancelled for aircraft in the US but reinstated later. A terror insurance programme has been set up by the US government in the wake of this cancellation to cover commercial airlines. Global airlines' body, International Air Transport Association, has also suggested that those airlines which are operating in those countries which do not offer war risk insurance were at a competitive disadvantage.

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