A Review Of Aviation Insurance And Jurisdiction To Claim.

A Review Of Aviation Insurance And Jurisdiction To Claim.

Aviation Insurance in India: A Growing and Competitive Sector

The Indian civil aviation industry has experienced significant growth in recent years, driven by factors such as modern airports, low-cost carriers, Foreign Direct Investment (FDI), liberalization, privatization, and globalization. Currently, India ranks as the ninth-largest civil aviation market in the world. Despite this growth, the industry is still in its nascent stages, with much of its potential yet to be realized. Policymakers are working with stakeholders to create efficient and rational regulations that make air travel more accessible, considering that air transport remains expensive for a large portion of the population.

The government has been proactive, creating a comprehensive legal framework for the aviation sector. This framework includes 10 legislations, 7 rules and regulations documents, and 10 guidelines and policies, ensuring the sector’s smooth functioning and growth.

Aviation Insurance: An Essential Component of Civil Aviation

Aviation insurance covers the various risks inherent in civil aviation and is uniquely specialized due to the specific jargon and complexities involved. While aviation insurance is often seen as part of broader insurance categories, it is a distinct field that requires expertise due to the high stakes and technical nature of the industry.

India lacks a separate space law, so the legal provisions for aerospace insurance are interpreted under civil aviation law. The first aviation insurance policy was written in London in 1911 and became more widely recognized after the Warsaw Convention of 1929. Over the decades, the industry has evolved, leading to the formation of bodies such as the International Union of Aviation Insurers (IUAI) in 1933 to standardize and regulate aviation insurance.

Given the catastrophic potential of aviation accidents, no single insurer can bear the risks alone. Consequently, airlines typically create fleet policies to cover potential losses, a common practice given the high cost and catastrophic nature of possible claims.

Types of Aviation Insurance

Aviation insurance generally includes the following types:

1. Public Liability Insurance: Also known as third-party insurance, this covers the owner of the aircraft for damages caused to third parties, such as destruction of property (houses, vehicles, etc.) or collisions with other aircraft. However, it does not cover damage to the aircraft itself or passenger injuries.

2. Passenger Liability Insurance: This insurance protects passengers injured during a flight. It is mandatory in many countries and is often sold per seat, bundled with the ticket price.

3. Combined Single Limit (CSL): This combines both public and passenger liability insurances into one coverage. CSL covers a wide range of liabilities, such as:

   • General legal liability
   • Cargo legal liability
   • Registered and unregistered baggage
   • Third-party liability, etc.

4. Ground Risk Hull Insurance (Not in motion): This insurance covers aircraft when stationary on the ground and protects against damage from natural events like floods or vandalism.

5. Ground Risk Hull Insurance (In motion): Similar to the above but covering the aircraft when taxiing. This insurance coverage ends once the plane begins its takeoff.

6. In-Flight Insurance: This covers the aircraft during all phases of its operation—from takeoff to landing. It’s a comprehensive policy, but also the most expensive due to its all-encompassing nature.

Common Exceptions in Aviation Insurance

Certain exceptions are typically included in aviation insurance policies:

• Wear and tear: Damage due to the natural wear and tear of the aircraft.
• Illegal use: Claims resulting from the aircraft being used for illegal purposes.
• Exceeding travel limits: Claims made when the aircraft operates beyond the previously agreed travel limits.
• Self-inflicted damage: Losses resulting from the negligence or mistakes of the insured party.

Indian Insurers for Civil Aviation

The introduction of 100% FDI in India’s civil aviation sector has opened up the market, attracting international insurers to compete with established Indian players. Before the liberalization, the four state-owned insurers—New India Assurance, Oriental Insurance, National Insurance, and United India—dominated the market. However, the rise of private insurers, such as ICICI Lombard, Bajaj Allianz, Iffco Tokio, and Reliance General Insurance, has increased competition in the market.

With growing demand for aviation insurance, private insurers are introducing innovative policies that cater specifically to the needs of the Indian aviation sector. This increased competition is especially notable in the general aviation segment, which deals with aircraft having fewer than 61 seats.

International Legal Framework and Indian Jurisdiction

India ratified the Montreal Convention of 1999 in 2009, which governs international air travel. Under the Carriage by Air Act of 1972, the Indian jurisdiction for claims in aviation insurance includes five venues:

1. The place where the ticket is issued.
2. The place of business of the carrier.
3. The place of the passenger’s destination.
4. The place of domicile of the carrier.
5. The place of domicile of the passenger.

Conclusion: A Competitive and Growing Sector

India’s aviation insurance sector has become highly competitive, especially with private companies like ICICI Lombard and Bajaj Allianz entering the market. These companies, along with state-owned insurers, are now vying for a share of the expanding civil aviation insurance business.

The government’s allowance of 100% FDI has further opened the doors for foreign companies, contributing to the modernization of the industry. Companies like Jet Airways and Etihad Airways have already formed strategic alliances, such as Jet Airways selling 23% of its stock to Etihad. This influx of foreign investment has bolstered India’s aviation insurance market, which now comprises about 25% of the overall sector. With continued efforts, firms like ICICI Lombard and New India Assurance dominate the civil aviation insurance sector.

Overall, the civil aviation industry in India is economically booming, creating a dynamic and competitive insurance market that promises significant growth and opportunities in the coming years.

This publication is for general information only and does not constitute legal advice. The author has consulted various books and other resources to compile the introductory content. This publication is protected by copyright.
©  Astrea Legal Associates LLP.