The crash of Air India’s Boeing 787 Dreamliner in Ahmedabad on June 12, which claimed the lives of 242 passengers, is expected to become India’s most expensive aviation insurance claim to date.
The Tata Group, which owns the airline, has announced ₹1 crore ex gratia compensation for the families of each deceased passenger. But beyond this interim aid, the final insurance payout is likely to be far bigger and more complex — governed by international aviation treaties and global insurance arrangements.
Industry experts point out that compensation for passenger deaths in this case will follow the Montreal Convention of 1999, an international treaty on airline liability to which India became a signatory in 2009. Under this, airlines are liable to pay up to 128,821 Special Drawing Rights (SDRs) — roughly $171,000 — per passenger, regardless of fault.
Amit Agarwal, CEO of Howden India, explains that while the airline can offer interim relief, the actual compensation will depend on the passengers’ nationalities, insurance cover bought by Air India, and whether any negligence is proven. Some claims could even rise to $2,50,000, depending on circumstances.
The SDR value varies based on currency fluctuations. As of October 2024, one SDR equalled about $1.33, so even a standard claim per victim would be substantial in rupee terms.
Beyond passenger claims, the wrecked Dreamliner itself adds a massive cost. The aircraft (VT-ABN) was a 2013 model, and according to experts, could have been insured for about $115 million as of 2021. The actual insured value may vary depending on upgrades or depreciation, but it is clear the hull loss will be a major component of the total claim.
Aircraft hull insurance typically covers the market value of the plane, including spares and onboard equipment. For newer Dreamliners, this value ranges between $211 million and $280 million. Whether the Ahmedabad crash results in a partial or total loss settlement depends on the insurer’s assessment.
Air India’s insurance cover — part of a $20 billion global aviation insurance programme — is spread across international markets. This includes Indian insurers like Tata AIG, New India Assurance, and GIC Re, working in tandem with global giants such as AIG.
Narendra Bharindwal, president of the Insurance Brokers Association of India, quoted in a news report says no single company shoulders the full risk. Global reinsurers, mostly based in London and New York, share slices of the policy — some as small as 1.5 to 2 %, with a lead insurer typically holding 10-15 %. This kind of risk-sharing is meant to cushion any single player from a devastating blow, but it also means the ripple effects will be felt internationally.
Following the crash, shares of New India Assurance and GIC Re fell by 4 % and 3 % respectively on Indian exchanges — an early sign of market jitters around potential liability.
While the hull loss is substantial, experts believe the real financial weight will come from liability payouts — compensation to victims’ families and damage on the ground. And because the risk is spread across global reinsurers, the financial hit won’t stay within India.
Large-scale payouts tend to push up aviation insurance premiums globally. Since aviation policies are renewed annually, a spike in claims like this one is likely to raise costs for airlines everywhere in the coming cycles.
The situation echoes past aviation disasters that had an outsized impact on insurers, including incidents involving Malaysia Airlines and Ethiopian Airlines. Any major crash typically leads to a reassessment of risk pricing, particularly for long-haul and wide-body aircraft.
Investigations are still underway to determine the cause of the crash — whether it was a technical fault, bird strike, or some other factor. But from an insurance standpoint, that may only partially affect the initial compensation payout. What it will influence, however, is whether additional claims, penalties, or litigation follow.
If the crash is found to involve systemic failure or negligence, there could be secondary waves of liability, both from passenger families and regulators. For now, though, the process will follow the Montreal Convention’s structure, with insurers preparing for significant claims settlements — and the industry watching for its broader consequences.