Tata AIG to vie for Indian conglomerate's airline insurance business

Tata AIG General Insurance Company, a joint venture between Tata Sons and USA’s AIG, will join the race to provide insurance cover for the Indian conglomerate's airlines, including Air India.

Indian state-owned companies presently provide insurance cover to the airlines and re-insure the assets with foreign firms. AIG is already the biggest reinsurer for Air India, counting among a international consortium providing cover to the airline’s 117-strong fleet. With its Indian partner now owning Air India and Air India Express, it will make a bid to get the business, said a source close to the development.

A source said Air India is insuring its fleet at a premium of Rs 118 crore in fiscal 2021 on a standalone basis, compared to Rs 158 crore paid in the previous fiscal ending March 2020. State-owned insurance companies retain only one per cent of the insurance premium and pass on the rest of the premium and risk to an international consortium, de-risking their own books.

“Any accident usually results in a huge outgo. Take for example, following the Kozhikode Air India Express accident in August 2020, the insurance companies shelled out Rs 700 crore as initial claim and more claims are still in process. A lone insurance company cannot provide the cover to any airline as the claims can go very high due to any accident,” said a source close to the development.

The total fleet size of all Tata’s four airlines will be 221 aircraft: 141 aircraft of Air India and Air India Express, 47 of Tata SIA Airlines and 33 of AirAsia India. Taken together, the premium paid by the four airlines will be substantial and help Tata AIG to shore up its India business.

A spokesperson for Tata Sons, the holding company of the group, did not reply to an emailed questionnaire. Tata AIG is owned by Tata Sons and AIG, which hold stake of 74 per cent and 26 per cent stakes in the insurer, and is a niche player providing cover to D&O (directors and officers) of companies and for cybercrime.

In India, over the last five years, Tata AIG General Insurance Company has received Rs. 750 crore of capital from the parent entities. It reported a higher solvency ratio of 2.32 times as of June 2021 and 2.22 times as of March 2021 (1.84 times as of March 2020) backed by the higher profitability. The company reported gross direct premium of Rs 8042 crore and profit after tax of Rs 448 crore for the fiscal 2021. Net investment income including realised gains grew 24 per cent to Rs. 1,136 crore in the fiscal year ending March this year from Rs. 913 crore in FY2020 backed by higher growth in the investment book. The total Investment book grew 36% with higher retention and increase in advance premiums in FY2021.