‘$125 million for the hull and the remaining of over $350 million for liability.’
IMAGE: AI 171 was seen in flames after it crashed into a medical college complex in Ahmedabad minutes after take-off on June 12, 2025.
Following the devastating Air India crash that claimed 260 lives, Ramaswamy Narayanan, chairman and managing director of the State-owned reinsurer General Insurance Corporation of India (GIC Re), spoke to Aathira Varier and Subrata Panda/Business Standard in Mumbai about claims the insurance industry is expected to see as a result of the tragedy.
What would be the claims outgo for the Air India crash?
Overall, I would expect a loss of about $475 million — $125 million for the hull and the remaining of over $350 million for liability.
This is what we will be providing for, regardless of market perception.
Our share is about 5.15 per cent of the $475 million — 4 per cent from obligatory cession and 1.15 per cent written through our London branch.
We will be making the provision in Q1.
It will be less than ₹200 crore (₹2 billion), so it will not have any impact on our profitability or solvency.
Overall, our aviation segment is small, accounting for nearly 2 to 3 per cent.
IMAGE: Investigators inspect the wreckage of the London-bound Air India flight which crashed on June 12, 2025 in Ahmedabad. Photograph: ANI Video Grab
How will aviation insurance rates get impacted because of this incident?
It is too early to estimate how much rates will increase.
What could happen is that rates for Air India may go up.
Prices in India could also rise, and IndiGo might have to bear some of that impact — we will have to see how the market reacts.
Sometimes even regional markets are affected — such as Nepal, Bangladesh, and Bhutan.
This is typically how reinsurers operate: they tend to assess losses from a regional perspective.
I do not think this particular loss will impact fleets worldwide — unless, by the time renewals happen later this year, someone can clearly establish that the loss occurred due to Boeing.
In that case, airlines with Boeing aircraft in their fleets may see a hike in premiums.
With the geopolitical tension rising, what is the impact on marine insurance rates?
It hasn’t hardened much. I don’t think the losses have reached that level, and prices haven’t changed — at least not significantly.
There is no revision at the moment. However, prices could go up if the war between Iran and Israel escalates further, as the situation is in a region where it can have an impact.
IMAGE: The tail of AI 171 stuck in the B J Medical College hostel mess building in Ahmedabad, June 12, 2025. Photograph: CISF/ANI Photo
If obligatory cession is brought down to zero, what impact would it have on the company?
There is a lot of noise around this issue. The demand is coming from specific pockets, while others are unaffected.
There is a difference of opinion regarding how commissions are being distributed.
Typically, private insurance companies that are profitable feel they are subsidising others — particularly the State-owned ones.
Currently, under the obligatory cession, Insurance Regulatory and Development Authority of India (Irdai) decides the minimum commission to be paid, and this varies.
We have suggested to Irdai that we understand how to price a contract and how to structure commissions.
So, if Irdai simply specifies the obligatory cession, we can handle the rest.
Irdai has agreed to this approach, but the proposal is still pending with the department of financial services (DFS).
Also, if the obligatory cession is significantly reduced, it may continue in another form with some companies — what we call a voluntary quota share.
While we may lose some business in segments like retail health or motor, overall, I don’t think it will pose a major problem.
What are your plans to grow your international book?
We grew by about 28 per cent during the January renewals.
In the April renewals, we resumed underwriting in Japan — a market we had lost due to our ratings downgrade.
We have seen growth, but it has not yet returned to the levels we were at in 2020.
Currently, the domestic-to-international business share is 75:25. I will continue to grow our international portfolio, but I do not expect the domestic-to-international ratio to change significantly in the near term.
It is because the domestic market is growing so rapidly. In the long term, however, our goal is to move closer to a 50:50 split.
IMAGE: A crane removes the wreckage of the Air India Boeing 787-8 Dreamliner aircraft, June 14, 2025. Photograph: Amit Dave/Reuters
Domestically, which segments do you see offering the maximum growth opportunities?
Health has been a priority for us, as retail health performed well post-Covid.
The health segment faces several challenges — most notably, rising claims costs due to inflation.
We are exploring ways to regulate hospitals to manage these costs.
Apart from health, we are also focusing on surety bonds. Cyber insurance and the broader liability space are also areas of interest for us.
Feature Presentation: Rajesh Alva/Rediff
