MUMBAI/NEW DELHI: The fatal crash of an Air India-operated Boeing 787 Dreamliner in Ahmedabad on Thursday is set to become one of the most complex aviation insurance events in recent years, with liabilities extending far beyond the aircraft’s hull value, industry sources told businessbenchmark.news
The wide-body jet, carrying 242 people, including 230 passengers and 12 crew, plunged into a densely populated residential area shortly after takeoff for London Gatwick. All onboard, except one, are feared dead, and local authorities have indicated the possibility of additional casualties near a medical college adjacent to the crash site.
While emergency responders continue efforts at the scene, aviation insurance experts say the financial implications are already reverberating through global underwriting hubs from London to Zurich.
The aircraft involved – VT-ABN – was reportedly a 2013 model. The hull was likely insured for around $115 million based on 2021 data, according to informed sources. This component is usually governed by an agreed-value policy under the hull all-risk section and is relatively straightforward to settle, assuming a total loss.
But that’s only part of the story.
Montreal Convention to guide compensation
Experts point out that liability exposure stemming from the crash is likely to far exceed the hull value, especially since the aircraft was on an international route. Compensation to passengers’ families will be governed by the Montreal Convention of 1999, to which India became a signatory in 2009.
“The nationality of each passenger will be critical,” said Hitesh Girotra, Vice President – Aviation & Specialty Lines at Prudent Insurance Brokers. “For example, British and Portuguese passengers may trigger higher liability exposures under applicable jurisdictions.”
Under current limits, airlines are strictly liable for up to 128,821 Special Drawing Rights (SDRs) – roughly $171,000 per passenger at prevailing rates – unless the airline can prove the incident wasn’t due to its negligence. Interim payouts by the airline may come earlier, but final settlements could take years depending on litigation and investigations.
Third-party liability: a widening circle
The location of the crash adds another layer of complexity. Since the plane came down in a residential area, third-party property and life liability will arise. “These claims could be substantial,” sources explained.
In cases involving residential damage, insurers may face lawsuits not just from affected families but also for long-term rehabilitation, property loss, and even emotional trauma, depending on legal interpretations in Indian and international courts.
Distributed risk, global impact
According to Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), no single insurer will bear the brunt of the financial burden. “Aviation insurance for large fleet operators like Air India is structured on a fleet basis and reinsured across dozens of global underwriters. Each reinsurer might hold only 1.5–2% of the exposure, while a lead underwriter may take on 10–15 per cent.”
But while the distributed nature of coverage protects individual firms, the crash is expected to contribute to market hardening – a tightening of underwriting conditions and rising premiums across the aviation sector.
“This will not immediately spike pricing, but in the next renewal cycle, incidents like this will be part of the cumulative global loss data. Premiums for wide-body aircraft are already under upward pressure, and this will reinforce that trend,” Bharindwal said.
One of the decade’s biggest aviation losses
If preliminary estimates are confirmed – a total hull loss, loss of 242 lives, and third-party casualties – this crash could rank among the largest commercial aviation losses globally in over a decade.
“Loss adjusters in London are already initiating early assessments. Reinsurers in Europe and the US will be closely monitoring this, particularly because it involves a Dreamliner, which generally has an excellent safety record,” said another senior industry source familiar with the reinsurance structuring for Indian carriers.
In total, financial exposure for Air India and its insurers could run into several hundred million dollars, once all dimensions – passenger compensation, third-party liability, environmental cleanup, and legal costs – are accounted for.
A reckoning ahead for aviation risk
With the aviation sector already facing costlier premiums due to geopolitical instability and mounting attritional losses, experts believe Thursday’s tragedy could accelerate the tightening of terms in global insurance markets.
“It’s a tragic reminder that in aviation, one event can upend decades of loss modeling,” said Girotra. “For insurers, underwriters, and operators alike, the implications of this crash will be felt well beyond Indian airspace.”
