Higher premiums for aviation insurance on anvil


India’s airlines will likely have to pay 20-25% more in premiums for renewing the combined $30 billion of insurance cover on their fleet—the consequence partly of two disasters that struck Malaysian Airline System Bhd this year, airline and insurance executive say.

A Libyan militant group’s attack on Tripoli International Airport this month and extremist attacks on Karachi Airport in June have also put pressure on premiums that had already hardened after Flight MH370 with 239 people on board disappeared without a trace in March and MH17 was shot down over Ukraine in July, killing all 298 people on board.

“The reinsurance market is global in nature and any impact on premium rates will spill over to the Indian aviation sector as well,” said Kapil Mehta, managing director at SecureNow Insurance Broker Pvt Ltd. “After the crash of Malaysian Airlines, reinsurers are offering cover of terrorism and geopolitical risks at escalated premium rates. Not taking insurance for certain things can be one way to save costs for airlines,” added Mehta.

Mehta said insurance premiums are a relatively small portion of overall expenses incurred by India’s airlines, which have a combined fleet of over 300 planes. Even so, it adds to cost pressures at India’s airlines which, according to a June report by the Centre for Asia-Pacific Aviation (Capa), are expected to post combined losses of $1.4 billion in year to next 31 March.

Read the full report at livemint



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