Last Updated:June 13, 2025, 11:30 IST
While the aircraft damage will be covered in $280-million insurance coverage, the biggest cost will come from the ‘liability insurance’. Insurance claims may reach Rs 1,000 crore.
Air India Flight 171 crashed near Ahmedabad on June 12, killing 241 people. (Photo: News18)
In India’s one of the deadliest airline tragedies, a London-bound Air India Flight 171 crashed on June 12 claiming a total of 241 lives on board. Few also died in the doctors’ hostel where the Boeing 787-8 Dreamliner aircraft fell near the Ahmedabad airport. Air India has announced a compensation of Rs 1 crore each to the families of those lost their lives. However, the flight crash will also trigger insurance claims, which, as per estimates, might go as high as Rs 1,000 crore.
Airline liabilities in the event of death or injury are governed by international conventions such as the Montreal Convention, 1999, to which India is a signatory, according to experts.
They said that under the Convention, airlines are liable to pay:
- Up to 128,821 Special Drawing Rights (SDRs) (about $1.33 per SDR), as of October 2024, per passenger in case of death or bodily injury, irrespective of fault.
- Compensation beyond that limit is also possible if the airline is proven negligent.
While interim compensation may be announced by the airline, final compensation for passengers will be determined under the Montreal Convention of 1999, to which India became a signatory in 2009, brokerage firm Howden (India) MD and CEO Amit Agarwal told news agency PTI.
“Compensation is calculated using Special Drawing Rights (SDRs), which stood at 128,821 SDRs (approximately $1.33 per SDR) as of October 2024. The actual payout will depend on the coverage purchased by Air India,” Agarwal said.
On Thursday, June 12, a London-bound Air India plane carrying 242 passengers and crew crashed moments after taking off from Ahmedabad International Airport. Of these, 169 are Indian nationals, 53 are British nationals, 1 Canadian national and 7 Portuguese nationals.
Aircraft Damage Insurance
Air India has insured its entire fleet under a $20-billion global aviation insurance programme. This insurance is divided into two parts — one for damage to the aircraft itself (called ‘hull insurance’) and the other for legal and passenger claims (called “liability insurance”).
As far as aircraft damage is concerned, Agarwal said, it would be covered under the aviation hull all-risk section, which insures the current valuation of the aircraft, including spares and equipment.
For a Dreamliner, this value can range between $211 million and $280 million, depending on its configuration, age, and other factors, he added.
“The aircraft involved (VT-ABN) was a 2013 model and, based on available information, was insured for approximately $115 million in 2021. Whether the damage is partial or total, the loss would be covered based on the value declared by the airline,” he said.
Narendra Bharindwal, president of the Insurance Brokers Association of India (IBAI), told PTI that aviation insurance programmes for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York.
“No single insurer bears the entire risk — coverage is widely distributed among global reinsurers, with shares as small as 1.5 per cent to 2 per cent and a lead reinsurer typically taking 10-15 per cent. The financial impact of such incidents is shared globally across this network,” Bharindwal said.
It is too early to ascertain the overall liability (passengers and third party) on the operator because of this crash.
Overall Insurance Claims
While the aircraft damage will be covered in the $211 million-$280 million insurance coverage, the biggest cost will come from the ‘liability insurance’.
Experts also said the actual amount the passenger receives will depend on a number of factors.
Typically, the claimant (family of the deceased passenger or the injured) has to prove the extent of the actual damage suffered. Factors such as age of the deceased passenger, educational status, employment, last salary drawn, marital status, general economic status, the number of dependants the extent of dependency are, typically, considered to assess the damage.
According to timesnownews.com, “The (overall) claim could go as high as Rs 1,000 crore and could have a ripple effect on the aviation insurance industry.”
It is being considered to be one of the deadliest and costliest airline crashes in the Indian aviation history.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso… Read More
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