Tuesday, August 25, 2020

In Testing Times, Insurers Should Be Sympathetic Towards Aviation Industry

Coronavirus pandemic has dealt a severe blow to the airline industry and 2020 has been the worst year in the history of the aviation industry. The International Air Transport Association (IATA) has painted a grim picture of the aviation sector. According to its report, aviation companies worldwide are expected to lose approximately USD 85 billion in 2020. The report also predicts that revenue is likely to fall from USD 838 billion to USD 419 billion, and passenger traffic will reduce to half to nearly 2.25 billion.

To rub salt in the wound, several plane crashes brought bad times for both the airline entities and its insurers. In January 2020, Iranian Islamic Revolutionary Guards shot down Ukraine’s Boeing 737-800 shortly after takeoff from Tehran Imam Khomeini International Airport. In February, Pegasus Airlines’ Boeing 737-800 skidded off the airstrip while landing at Turkey’s Istanbul-Sabiha Gökçen International Airport. In May, Pakistan’s Airbus A320 crashed in a residential area of Karachi killing at least 97 people.

The most recent accident was in August this year in Kozhikode. An Air India Express aircraft skidded off the tabletop runway, fell into a valley and split into two. Till now, at least 21 people have died in the accident.

For the Kozhikode crash, along with the public sector insurance conglomerate which reinsured the risk overseas, global reinsurers will have to reimburse more than 90 per cent of the insured value of the star-crossed plane that was damaged. Many insurance partakers sense that premiums may get elevated in the next fiscal year due to the increase in calamities. This is a grave concern for the half-dead airline industry.

Sophisticated technical operations of an airplane and resulting risks have exposed the aviation industry to a chain of slowdowns. This has cemented the way to aviation insurance. Aviation insurance is a dedicated insurance which has been framed to offer coverage to the precise operations of an aircraft and other conceivable jeopardies in aviation. Although aviation insurance was first introduced in the early years of the 20th century, the concept gained thrush only recently. Numerous aircraft tragedies have not only encouraged more people to buy aviation insurance, but it has also amplified the number of claims by a gigantic margin. The clauses, terms, limits in aviation insurance are exceptionally inimitable. The nature of coverage and the amount of premium hinge on the type of aircraft that is being covered by the policy. Aircraft insurance provides protection against a wide range of perils and shelter repairs to spoiled airplanes or other flying machines. Across-the-board coverage may also include impairment caused to airports, hangars, and other relevant land-based property.
24/08/20 Shivanand Pandit/Outlook
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