Airfare may rise as aviation insurance premiums set to increase after Gujarat plane crash

Following the recent crash of an Air India Boeing 787-8 Dreamliner in Ahmedabad, insurance costs in the aviation sector are likely to climb, which could lead to a 2-5% increase in airfares, according to industry experts.

The potential hike in insurance premiums stems from a combination of growing exposure to international routes, increased regulatory scrutiny, and the anticipated high-value claims resulting from the tragic incident.

The crash, which claimed 241 lives onboard and 10 on the ground, has come at a time when the global aviation insurance market is already under stress.

Sourav Biswas, Business Head - Aviation Insurance at Alliance Insurance Brokers, noted that while airlines like Air India and IndiGo have already renewed their current insurance policies, a notable increase in premiums is expected in the next renewal cycle.

Adding to the pressure is a recent multi-billion-dollar UK court ruling that mandates global reinsurers to cover aircraft losses tied to Russia’s geopolitical actions. This, combined with the Indian Dreamliner tragedy, may push reinsurers—responsible for hull and liability coverage—toward tightening their underwriting conditions.

Narendra Bharindwal, President of the Insurance Brokers Association of India, explained that major airlines typically receive fleet-wide insurance coverage, which is then reinsured in global markets like London and New York. These arrangements usually involve multiple reinsurers, with the lead reinsurer assuming up to 15% of the risk and others covering smaller shares, typically between 1.5% to 2%.

“This incident, along with others in recent months, will likely result in a hardening of the aviation insurance market, not just for the airline involved, but across the entire aviation sector,” Bharindwal said.

India’s aviation sector has historically seen insurance premiums of around ₹1,000 crore, but experts believe this figure could rise substantially due to recent developments, especially given India's status as one of the world’s fastest-growing aviation markets.

Meanwhile, the Life Insurance Corporation of India (LIC) has stepped in to support affected families. The insurer announced swift measures to ease their financial burden, including expedited claim settlements and special concessions.