BANGALORE, Feb 3(TOI): Kingfisher Airlines could face additional cost pressures as insurance premiums may harden for the airline once it comes up for renewal in June. Reinsurance brokers say the airline has made a claim of $17 million for extensive damage caused to its turboprop ATR that flew from Bhavnagar to Mumbai in 2009.
According to the Directorate General of Civil Aviation (DGCA), Kingfisher Airlines ATR-72 operating on the Bhavnagar -Mumbai sector skidded off the runway during landing at Mumbai Airport. The aviation regulator has classified this as "accident'' in its recent report contrary to the earlier classification as "incident.'' Industry sources attribute this accident as one of the factors that will push up insurance premiums by at least 10%.
A detailed questionnaire sent to the airline didn't elicit any response. The second-largest carrier coughed up Rs 56 crore towards aviation insurance in the 2010 fiscal compared to Rs 52 crore previously.
Airline spokesperson Prakash Mirpuri said, "Our marginal increase in insurance costs in FY 2010 over FY 2009 is mainly on account of increased wide-body aircraft deployment.'' Kingfisher has a fleet of 66 aircraft that includes two ATR 42-500s and 8 units of ATR 72-500s. Plus, it has added 10 units of A320s from the Air Deccan fleet.
Bajaj Allianz and ICICI Lombard are the co-insurers for Kingfisher Airlines. "As co-insurers our share varies from 10% to 30% in respective airlines," said T A Ramalingam, head of underwriting at Bajaj Allianz General Insurance. The total annual premium paid by domestic airlines is estimated to be in the range of $60 million. Jet Airways paid Rs 74 crore towards insurance in FY10 compared to Rs 72 crore in FY09. SpiceJet's insurance outgo was 18% higher to Rs 16 crore in FY10.
The basic coverage is for the hull of the aircraft, liability to passengers and third party for any sort of property damage or to the people outside the aircraft. It also includes personal accident cover to the crewmembers but customised to the needs of the client. Typically, premiums vary from 0.5% to 2.5% of the aircraft value.
The number of aviation accidents in 2010 will determine the insurance premiums for airlines, as underwriting capability is limited to Rs 150 crore in India. Hence, insurers abroad write a large portion of the aviation insurance. "Globally, the hull and liability premium for 2010 has crossed $2 billion in 2010 and this indicates that the insurance rates are still hard,'' said the head of risk and reinsurance at ICICI Lombard General Insurance Rajiv Kumaraswamy.
Industry estimates show that the total premium in the airline sector globally touched $1.9 billion in 2009 compared to $1.6 billion a year ago. The reinsurance rates hardened following 9/11 terrorist attacks in the US. A number of plane crashes in 2009 with three major accidents - Air France, Yemenia and Caspian Airlines - too increased the insurance premiums for airlines.