Saturday, June 20, 2009

Air France crash: GIC Re to pay $6 m in claims

General Insurance Corporation of India (GIC Re) will have to shell out around $6 million (approximately Rs 28 crore) towards its share of the claim arising out of the Air France crash in the Atlantic early this month. GIC Re had underwritten the cover of Air France’s fleet along with other international giants such as AIG and Allianz as part of its international business.

The hull and liability claim of the ill-fated aircraft is in the region of $600 million and GIC Re has participated in the reinsurance cover to the extent of 4%. The company’s net liability will be much lower as part of the risk has been passed on to other reinsurers.

Speaking to ET, GIC Re chairman Yogesh Lohiya confirmed that the maximum liability for GIC Re on account of the mishap would be in the region of $6 million.

The claim has not materialised yet but is expected to be lodged soon. GIC Re has increased its acceptance of reinsurance from abroad after the mandated reinsurance from local companies came down following liberalisation in 2001.

Although there were couple of aircraft claims under GIC Re’s aviation reinsurance programme, the corporation has decided not to change its strategy as rates are expected to harden in the aviation insurance business.

According to a Bloomberg report, the Air France claim may turn out to be the most expensive since 2001. The report said that families are entitled to compensation of at least $150,000 each. The most expensive claim to date has been that of an American Airlines crash in New York which happened days after the 9/11 attack.

In international flights, the payout towards passenger liability varies according to the earnings capacity of a passenger, among other things. Given that the aviation insurance is a niche market with a capacity of a couple of billion dollars, claims of this size will definitely put an upward pressure on rates.

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