No extra premium on planes flying to tabletop airports

Tabletop airports though considered risky, Indian insurers do not charge anything extra on their basic premium while providing insurance cover for the planes and the passenger liability, said industry experts.

Simply put, a tabletop runway is one which is built after cutting the top of a mountain and where there is a valley at both the ends. In other words, it is like landing the aircraft on a table.

"There is nothing called 'tabletop runway loading' on the basic premium charged by insurers while providing 'all risks cover' for aircraft and passenger liability for commercial airlines," a senior insurance industry official told IANS on the condition of anonymity.

In the case of automobile insurance, insurers have divided the country into two regions and the premium differs based on the region where the vehicle is driven.

On August 7, an Air India Express flight from Dubai overshot the runway and crashed into the valley. The aircraft broke into two pieces and 18 people died in the accident.

The aircraft insured for $50 million was a total loss and the airline will be paid that sum by the insurers.

"Typically aviation underwriters across the globe take into consideration following parameters in mind while underwriting any commercial airline - Aircraft - Make/Fleet Size/Age of Fleet, Topography/Geography of Operations, Pilot Experience, Maintenance/Safety Measures, Country of Origin and Claim Experience," an insurance industry official said.

"While pricing for any airline, above mentioned factors are considered, but the weightage of any factor varies from airline to airline. For instance, geographies like Nepal and Bhutan, more weightage is given to terrain/topography as they predominantly have table-top runways, hence the pricing for these types of airlines is on a higher side."

However, the official said there is nothing called `tabletop runway loading' on the airlines that fly to such airports.

The Air India Express flight accident is the second major one that has happened on a tabletop runway.

The first only was in 2010 at Mangalore Airport in which an Air India Express flight from Dubai overshot the runway and fell into the valley and burst into flames killing 158 passengers.

That aircraft was also a total loss for the insurers.

Another insurance industry official told IANS that the total commercial aviation insurance market in India with about 510 aircraft will be nearly $90 million.

"The risk is concentrated on a small base while the value is very high," the official said.

"The aircraft hull insurance is an 'all risk policy'. The explicit risk exclusions define what is covered. Many of the exclusions like war, terrorism risk, and claims deductible can be covered for a premium."

The aviation insurance business is primarily reinsurance driven, that is, the primary insurers retain only small portion of the risk with them and reinsure the balance with reinsurers.

A consortium of four public sector insurers -- New India Assurance Company Ltd, National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd -- has insured the fleet of nearly 170 aircraft belonging to Air India and its subsidiaries, including Air India Express.

The airline has taken policies covering the aircraft or hull and liability for third party and passengers.

The ill-fated Air India Express aircraft was insured for $50 million.

According to another official, the total liability under the liability policy taken out by Air India is nearly $750 million. The compensation to be paid to the passengers will be as per the Montreal Convention.

Industry officials told IANS that the direct claim hit for the consortium of four insurers will be only nearly 10 per cent of the aircraft value.

The balance value of the risk has been reinsured with Indian reinsurer GIC Re -- 5 per cent obligatory cess and 85 per cent with reinsurers with the lead underwriter, AIG, London.

The total premium earned from Air India was nearly $36 million.

The share of New India in the premium and claims will be 40 per cent and the balance 60 per cent will be shared equally by National Insurance, Oriental Insurance and United India.