Air India Crash Expected to Harden Global Aviation Insurance Market

Key Takeaways

• Air India flight AI171 crashed near Ahmedabad on June 12, 2025, killing all 242 onboard and some on the ground.
• The Boeing 787-8 Dreamliner was insured for $75–115 million; total claims expected between $130–150 million.
• TATA AIG leads insurance; crash will harden aviation insurance market with higher premiums and stricter underwriting.

On June 12, 2025, tragedy struck when Air India flight AI171, a Boeing 787-8 Dreamliner, crashed shortly after takeoff from Ahmedabad on its way to London Gatwick. All 242 people onboard lost their lives, and the aircraft also hit a building housing medical students, causing more casualties on the ground. This disaster is the most serious wide-body plane crash in over a decade and is expected to have a major impact on the global aviation insurance market, airline safety policies, and the way compensation is handled for victims and their families.

What Happened: The Crash and Immediate Response

The Air India Boeing 787-8 Dreamliner, tail number VT-ANB, was carrying 217 adults and 11 children among its 242 passengers and crew. The nationalities included 169 Indian citizens, 53 British, 7 Portuguese, and 1 Canadian. Shortly after takeoff, the plane crashed, resulting in no survivors. The crash site also included a building with medical students, adding to the tragedy.

Air India’s CEO, Campbell Wilson, quickly confirmed that a special team was set up to help families of the victims. He also stated that investigations were underway, with support from international agencies such as the U.S. National Transportation Safety Board (NTSB) and the Federal Aviation Administration (FAA), who are ready to assist if needed.

The Directorate General of Civil Aviation (DGCA), India’s main aviation regulator, has started a formal investigation. No immediate policy changes have been announced, but experts expect this incident to lead to a review of aviation safety and insurance rules worldwide.

The Insurance Picture: Who Pays and How Much?

Insurance Coverage Details

• Hull Insurance (the aircraft itself): The Boeing 787-8 Dreamliner was insured for between $75 million and $115 million, based on its 2013 model value. However, depending on its configuration and age, the market value could be as high as $211–$280 million.
• Passenger and Third-Party Liability: This covers compensation for passengers and people affected on the ground. The estimated coverage is at least $50 million.
• Total Expected Claims: The total insurance payout is expected to be between $130 million and $150 million, making it one of the largest commercial aviation losses in recent years.

Who Are the Insurers?

• TATA AIG General Insurance is the lead insurer for both the hull and liability coverage. This means TATA AIG will handle the main part of the claim and coordinate with other insurers.
• New India Assurance is another primary domestic insurer involved in the coverage.
• GIC Re (General Insurance Corporation of India) is the country’s mandatory reinsurer and is expected to take about 5% of the hull claim.
• AIG London is likely the lead international reinsurer, with many other global reinsurers sharing the risk.

Air India’s total fleet insurance is worth $20 billion, with an annual premium of $30 million. However, for this crash, only about 10% of the loss will be paid by Indian insurers. The rest will be covered by global reinsurers, who help spread the risk across many companies worldwide.

How the Claims Process Works

1. Notification: Air India and its insurers quickly notify all reinsurers and start the claims process.
2. Assessment: Loss adjusters and surveyors check the damage to the aircraft and the total liability.
3. Interim Compensation: Air India may offer temporary payments to families of victims while the final compensation is decided.
4. Legal Proceedings: The final compensation amounts are determined through legal processes, following international conventions and local laws.
5. Settlement: Insurers and reinsurers pay out according to their share of the risk.

The Montreal Convention: How Compensation Is Calculated

Compensation for victims’ families is governed by the Montreal Convention, an international agreement that sets rules for airline liability in case of accidents. As of October 2024, the cap for compensation was 128,821 Special Drawing Rights (SDRs), which is a type of international money used by the International Monetary Fund. At the time, this was about $1.33 per SDR, but the actual payout can vary depending on the victim’s nationality and the outcome of legal proceedings.

The legal process for these claims can be long and complicated, especially when it comes to third-party and passenger compensation. Each case may be handled differently, depending on where the victims are from and the specific details of the crash.

Why This Crash Matters for the Insurance Market

Hardening of the Aviation Insurance Market

This crash is expected to make the global aviation insurance market tougher, a process known as “hardening.” Here’s what that means:

• Stricter Underwriting Standards: Insurers will be more careful when deciding which airlines to cover and under what terms.
• Reduced Flexibility: Airlines may find it harder to negotiate policy terms or get special coverage.
• Rising Premiums: The cost of insurance, especially for wide-body jets like the Boeing 787-8 Dreamliner and airlines with large fleets, is expected to go up.

Narendra Bharindwal, President of the Insurance Brokers Association of India, pointed out that the risk is shared globally, but the growing number of large losses will likely push premiums higher and make insurers less willing to take on risky clients.

Sourav Biswas from Alliance Insurance Brokers explained that while this single event may not cause an immediate spike in premiums, the combined effect of recent big losses will drive up costs and make it harder for airlines to get the coverage they want.

Impact on Indian Insurers and Reinsurers

Indian insurers, like TATA AIG General Insurance and New India Assurance, will only pay a small part of the total claim because most of the risk is passed on to global reinsurers. However, even this small share can affect their solvency ratios, which measure how well they can pay claims compared to their assets. This is especially important for the lead insurer, TATA AIG.

GIC Re, India’s main reinsurer, is expected to take about 5% of the hull claim. The rest will be handled by international reinsurers, mainly based in London and New York. Each reinsurer usually takes a small share (1.5–2%) of the risk, with a lead reinsurer managing a larger portion (10–15%).

How Airlines Arrange Insurance

Major airlines like Air India arrange insurance for their entire fleet, not just individual planes. This is called a fleet-level insurance program. The risk is spread across many insurers and reinsurers worldwide, so no single company is hit too hard by a big loss. This system helps keep the insurance market stable, but when a major crash happens, it can still have a big impact on prices and terms for everyone.

Broader Implications: What Changes Might Happen Next?

For Airlines

• Higher Insurance Costs: Airlines, especially those with wide-body jets like the Boeing 787-8 Dreamliner, will likely face higher premiums and stricter policy terms at their next insurance renewal.
• More Safety Reviews: Airlines may need to review their safety protocols and maintenance routines to reassure insurers and regulators.
• Possible Changes in Routes or Fleets: Some airlines might change the way they operate to lower their insurance costs, such as flying smaller planes or avoiding high-risk routes.

For Insurers and Reinsurers

• Tighter Underwriting: Insurers will look more closely at each airline’s safety record, maintenance history, and risk management practices.
• Reduced Capacity: If more large losses happen, some insurers may decide to leave the aviation market or reduce the amount of risk they are willing to take.
• Pressure on Profits: Even though most of the loss is shared globally, repeated big claims can hurt insurers’ profits and make them more cautious.

For Passengers and Victims’ Families

• Compensation Rights: The Montreal Convention ensures a minimum standard of compensation, but the actual amount can vary depending on legal outcomes and the victim’s nationality.
• Long Legal Processes: Families may have to wait months or even years for final compensation, especially if there are legal disputes.
• Interim Payments: Airlines often provide temporary payments to help families while the legal process is ongoing.

For Regulators and Policymakers

• Review of Safety Standards: Regulators in India and around the world are likely to review safety rules and procedures for airlines and airports.
• Possible New Rules: There may be new requirements for insurance coverage, safety checks, or pilot training.
• International Cooperation: Agencies like the DGCA, NTSB, and FAA may work together more closely to improve safety and prevent future accidents.

Historical Context: How Does This Compare to Past Incidents?

The last major Air India crash happened in Kozhikode in 2020, resulting in 21 deaths and about $38 million in passenger liability payouts. That incident was much smaller in scale compared to the 2025 crash, both in terms of loss of life and insurance claims.

The aviation insurance market has been getting tougher since the late 2010s, with rising claims, geopolitical risks, and the increasing cost of modern aircraft. This latest crash is expected to make the market even stricter, with higher premiums and less flexibility for airlines.

What Happens Next? The Future of Aviation Insurance

Premium Increases and Market Changes

Experts agree that renewal terms for aviation insurance will become more demanding. Airlines with large fleets or those operating in higher-risk areas will see the biggest increases in premiums. Insurers will also be less willing to offer special terms or discounts.

The global reinsurance market, centered in London and New York, may face more pressure if similar large losses continue. This could lead to further consolidation, with fewer companies willing to take on aviation risks.

Regulatory and Safety Reviews

Indian and international regulators are expected to review safety protocols and insurance requirements in light of the crash. This may lead to new rules for airlines, airports, and insurers.

Impact on Passengers

For travelers, the main impact will be on ticket prices, which could rise if airlines pass on higher insurance costs. Passengers can also expect airlines to focus more on safety and risk management.

Practical Guidance for Affected Families and Stakeholders

If you are a family member of a victim or otherwise affected by the crash, here are some practical steps:

• Contact Air India: Visit the Air India official website for updates and emergency contact information.
• Understand Your Rights: Compensation is governed by the Montreal Convention, but actual payouts may vary. Seek legal advice if needed.
• Follow Official Updates: The Directorate General of Civil Aviation (DGCA) provides updates on the investigation and regulatory changes. Visit the DGCA official website for more information.
• Insurance Claims: If you are involved in a claim, work with the airline and insurers to provide necessary documents and information. Be prepared for a process that may take time.

Summary Table: Key Insurance and Liability Figures

Expert Perspectives: What Industry Leaders Are Saying

• Narendra Bharindwal (Insurance Brokers Association of India): Emphasized the global sharing of risk and predicted that the growing number of large losses will make the insurance market tougher.
• Sourav Biswas (Alliance Insurance Brokers): Explained that while this crash alone may not cause a sudden spike in premiums, the overall trend is toward higher costs and stricter terms.
• Air India CEO Campbell Wilson: Confirmed ongoing support for families and a commitment to transparency during the investigation.

As reported by VisaVerge.com, the crash of Air India’s Boeing 787-8 Dreamliner is a turning point for the aviation insurance market. The event will likely lead to stricter rules, higher costs, and more careful risk management across the industry.

Where to Find More Information

• Directorate General of Civil Aviation (DGCA): For updates on the investigation and regulatory changes.
• Air India: For official updates and support for affected families.
• Insurance Regulatory and Development Authority of India (IRDAI): For information on insurance policies and claims.
• International Air Transport Association (IATA): For global aviation insurance standards.

Key Takeaways

• The Air India crash involving a Boeing 787-8 Dreamliner is one of the largest aviation insurance losses in recent years.
• TATA AIG General Insurance is the lead insurer, with most of the risk shared globally.
• The crash is expected to make the aviation insurance market stricter, with higher premiums and less flexibility for airlines.
• Compensation for victims’ families will follow the Montreal Convention, but the process may be long and complex.
• Airlines, insurers, and regulators will all face new challenges as they respond to the aftermath of this tragedy.

The full impact of this disaster will become clearer in the coming months as investigations continue and the insurance market adjusts to the new reality. For now, the focus remains on supporting affected families, understanding what went wrong, and making the skies safer for everyone.

Learn Today

Boeing 787-8 Dreamliner → A modern wide-body aircraft used by Air India, involved in the 2025 crash near Ahmedabad.
Hull Insurance → Insurance coverage for physical damage to the aircraft itself in case of accidents or losses.
Montreal Convention → An international treaty setting airline liability rules and compensation limits for accident victims.
Reinsurer → A company that insures insurers, sharing large risks to protect them from big financial losses.
Special Drawing Rights → An IMF international monetary unit used to calculate compensation limits for victims under the Montreal Convention.

This Article in a Nutshell

On June 12, 2025, Air India’s Boeing 787-8 crashed after takeoff, killing 242 people. This tragedy impacts global aviation insurance, triggering stricter policies, higher premiums, and complex compensation governed by the Montreal Convention to support victims’ families amid long investigations and legal processes.
— By VisaVerge.com