Dreamliner crash could entail insurance payout of over Rs 1K cr

Mumbai/ Bengaluru: The insurance payout involving the devastating Dreamliner crash could be of the order of Rs 1,000 to Rs 1,200 crore and could harden the global aviation insurance market, especially for wide-body aircraft operators in Asia.

Of the 242 persons on board the Ahmedabad-London Gatwick flight, there is only one survivor. The flight had 12 crew members including the pilot and the first officer. Of 230 passengers, 169 Indians, 53 British, 7 Portuguese, and 1 Canadian. 

After the crash - within seconds after the take-off from the Sardar Vallabhbhai Patel International Airport in Ahmedabad, the Boeing 787-8 was completely damaged - the debris at Meghaninagar showed. The Dreamliner was a 2013 model. 

It is to be noted that on Thursday, Tata Sons Chairman N Chandrasekaran, who is also Chairman of Air India, has announced that the company will offer Rs 1 crore to the families of individuals who tragically lost their lives in the plane crash. 

As no single insurer bears the entire risk — coverage is widely distributed among global reinsurers, with shares as small as 1.5-2% and a lead reinsurer typically bearing 10-15%. 

“The Boeing 787-8 aircraft is estimated to have been insured for Rs 650–700 crore, based on age-adjusted insured value,” a market source said. 

In India, airline liability for passenger injury or death is governed by the Carriage by Air Act, 1972, as amended to align with the Montreal Convention (1999). Under this Convention, families of deceased passengers are entitled to Rs 1 crore each. With 241 fatalities, this could result in payouts exceeding Rs 241 crore.

In India, 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 - which would translate to around up to 128,821 special drawing rights (SDRs) (around Rs 1.55 crore) per passenger. 

The total projected insurance payout - combined hull and liability exposures may cross Rs 1,000–1,500 crore, depending on final settlements and legal claims, the sources said. 

Carriers are required to pay compensation in two tiers automatically. Under Tier-1 they have to pay up to 100,000 SDR (about ₹75 lakh), under Schedule III of the Act — no need to prove negligence. 

“India’s liability regime strikes a balance: ensuring prompt, no‑fault compensation, while preserving the ability for higher claims when carriers are at fault. For families of those affected by this crash, it provides a solid foundation for both immediate assistance and potential future claims based on investigation findings,” Narendra Bharindwal, President, Insurance Brokers Association of India (IBAI) told DH.

Under Tier-2 (Fault-based, unlimited liability), they have to pay beyond 100,000 SDR, airlines can avoid paying more only by proving they were not negligent or that a third party was at fault, Bharindwal said.

If baggage is lost, delayed or damaged on international flights, liability aligns with 1,288 SDR (about ₹1.2 lakh) under the Montreal Convention.

Cut-off box - ‘Insurance framework is lifeline but also a battleground’
MUMBAI DHNS: From a legal standpoint the insurance framework is a lifeline but often a battleground. The  Air India incident in Ahmedabad exposed how quickly claims can balloon pushing premiums skyward and forcing airlines to cut corners elsewhere which only compounds risk said Sonam Chandwani Managing Partner KS Legal & Associates one of the top law firms which works with big corporate houses and companies. 
“The aviation industry in India operates in a high-stakes environment where risks like mechanical failures human error and unpredictable weather can spiral into catastrophic losses. From a legal standpoint the insurance framework is a lifeline but often a battleground” she said. 
“Airlines lean on complex policies such as hull insurance for aircraft damage passenger liability for injuries and third-party coverage for ground impacts but these are underwritten in a global market where Indian carriers face scrutiny for inconsistent safety records. The system is robust on paper but when a crash happens insurers play hardball delaying payouts to minimise exposure” said Chandwani.