Ahmedabad crash: Insurance claims payout could run up to Rs 2,400 Crore, say experts

Air India’s $2 billion fleet is insured by Tata AIG as lead insurer and other insurers, and has reinsurance from the London market. But its current liabilities are yet to be assessed, which means the total claims payout is unknown and can only be speculated at this stage.

Sources said that the total payout expected from this tragedy could stand between $210–280 million (up to Rs 2,400 crore), combining the hull loss, passenger liability, and third-party claims. Tata AIG General Insurance CEO Amit Ganorkar told The Federal that he hopes to be able to give an update shortly.

Multi-layered insurance claim

This extensive coverage framework is now being tested after the crash of Air India’s Boeing 787-8 Dreamliner (registration VT-ABN) in Ahmedabad on June 12, one of the deadliest aviation disasters in Indian history. The incident has triggered a multi-layered insurance claim involving hull loss, passenger and third-party liabilities, and reinsurance mechanisms that span global markets.

Also Read: Over 1,100 Dreamliners criss-crossing skies; first fatal accident with Air India crash

The Dreamliner that crashed was manufactured in 2013, and could have been insured for anywhere between $75–$80 million, said one source. But another source said that it's possible it could have been insured as high as $120 million. In the event of total loss, insurers typically disburse the full agreed sum.

‘Full sum may be paid out’

Girish Radhakrishnan, former CMD of United India Insurance, told The Federal, "There is hull loss, passenger liability, and third-party liability currently that needs to be paid. And in a full total (hull) loss, there is an agreed value between the airline and insurers. And 100 per cent of the agreed value is usually paid out."

He added, "This is not like the case of the two ships sinking off the coast of Kochi, where there could be some recovery. In airline policies, it's an all-risk policy with nearly no exclusion, so we can expect the full sum to be paid out to Air India and the victims."

Third-party fatalities, property loss

When the plane crashed into a medical college hostel, at least five students and one staff member were killed on the ground. Beyond the human toll, the impact also caused severe structural damage to the hostel and nearby buildings. The combined cost of compensating for third-party fatalities and property loss is yet to be estimated.

Also Read: Engine failure? Bird-hit? What caused Ahmedabad plane crash? Experts weigh in

The burden of the claim is distributed widely, thanks to the structured insurance and reinsurance strategy in place. Air India’s reinsurance was done by Aon and Willis in the London market, with 85 per cent of the risk being taken off the hands of direct insurers by the reinsurers.

Ripple effects

Sources said Air India's $2 billion fleet insurance is insured by Tata AIG (45 per cent), New India (32 per cent), Oriental Insurance (14 per cent), ICICI Lombard (7 per cent), United (1 per cent), and National (1 per cent).

United India has already put out a statement reassuring the public of prompt claim support, with helpline numbers.

Also Read: Air India plane crash LIVE: Black box found; DGCA orders safety audit for Dreamliner fleet

Air India’s layered insurance and reinsurance strategy ensures that no single insurer shoulders an outsized burden from this catastrophic event. Nevertheless, the financial magnitude of the payout is likely to have ripple effects across the global aviation insurance market.

Montreal Convention on compensation

The Montreal Convention, an international treaty that governs airline liability, will be central to determining compensation for victims of the Air India crash. Adopted in 1999 and enforced since 2003, the treaty standardises how much compensation families of passengers on international flights can claim, regardless of the country they are from.

The crash resulted in the deaths of 241 passengers and crew, with only one survivor. The Tata Group has announced an interim payment of Rs 1 crore per family as immediate relief, independent of treaty obligations.

Among the deceased were 12 crew members. Since the Montreal Convention does not apply to airline staff, their compensation will be processed through employee insurance schemes that Air India has taken. The final amounts will vary based on salary levels, job tenure, and specific policy terms.

Also Read: Ahmedabad plane crash: Boeing says it's in contact with Air India

Under the Convention, airlines are strictly liable to pay up to 128,821 Special Drawing Rights (SDRs); about Rs 1.5 crore per passenger as of October 2024. In the Air India case, insurers have cited an even higher limit of 151,880 SDRs, or roughly Rs 1.8 crore, suggesting a revised or context-specific interpretation. Regardless of legal proceedings, families are also entitled to advance payments of at least 16,000 SDRs (Rs 18 lakh) for immediate expenses.

Since both India and the passengers' countries are signatories, the treaty applies automatically, streamlining claims and protecting families from years of litigation, at least for amounts within the liability cap. Compensation can go beyond the cap if airline negligence is proven, but that must be established in court.

Differing payouts

However, past crashes suggest that despite such legal frameworks, payouts can differ significantly based on who the passengers were and where they came from.

A source who had previously handled a very small portion of a Singapore-based reinsurer’s liability in the Lion Air case said, "When there was litigation in the past over the Max Boeing 737 crashes' payouts, what stood out was that of $4 billion (in discussion then) of the combined payout for Lion Air Flight 610 and Ethiopian Airlines Flight 302 - Ethiopian Airlines crash compensation was going to get the lion's share (above 60 per cent or $2.4 billion). And Lion Air compensation was about 40 per cent or less."

Also Read: After Ahmedabad crash, DGCA orders inspection of Air India's Boeing 787 Dreamliner fleet

Why the disparity?

"It is a question of nationalities," the source explained. "Ethiopian Airlines’ compensation is higher because there were 18 UN officials and a few Europeans on board that flight... UN officials’ salaries, though the members were African nationals, are calculated in USD based on living conditions in New York. That’s what made a major difference in the payout."

‘Payouts tied to national average income’

The source added that compensation is often tied to “the national average income of the family from that country,” since actuaries calculate potential loss from the death of a breadwinner using these data points.

One obstacle to maximising compensation, however, is the insurance policy cap.

Also Read: How Boeing 787 Dreamliner became a game-changer for long-haul flights

"At that point, some of the litigation delay is the ceiling cap," the source said. "Boeing back then was trying to limit the payout so it falls within the insurers’ liability; and it did not have to shell out from its pocket."

In contrast, the Montreal Convention offers a predictable baseline, at least when politics, nationality, and profit do not interfere.