Aviation covers to gain newer dimensions in gen insurance

Aviation insurance policies that were primarily used to cover the fleet of the airline companies is now in demand for the other covers provided by this policy. Insurance companies said that apart from airline insurance, covers for ground handling and aviation product liability has been increasingly being looked out for, by companies in the aviation space.

The traditional fleet insurance policies cover damages caused by major accidents and natural catastrophe are covered. Incidents of hijacking, enemy attacks and invasion are excluded from policy coverage.

"We are now looking at aviation products, general aviation and aerospace insurance covers. In the next few months, we will look at airline insurance as well," said M Ravichandran, president-insurance, Tata AIG General Insurance.

Insurance companies said that there is a rise in the number of companies operating in the aviation space. From a time when all airport operations were handled by a single player to a time when there are multiple players operating in the market for each function, the coverage requirements are very different. Hence, the covers have also been customised to suit the client needs.

The premiums for this segment are dependent on the size of the airport operations, number of airlines using the services and air-traffic data on an everyday basis in the location. With an increase in the number of airports in India and new airline companies entering the market, general insurers said that they will have to penetrate the market through expanding into newer routes and cities. This will automatically lead to a growth of aviation insurance market, according to the underwriting head of a private general insurer.

Over and above the fleet, aviation insurance policies of non-life insurers also covers general aviation, airport liability, loss of license insurers for crew of the airline (due to medical reasons) among others. Some companies also offer products that are customised for individual companies and airports, depending on the size and varied requirements.

Manik Nehra, Senior Manager - Aviation Insurance, Bajaj Allianz General Insurance said that because of the new airports coming up, there will be a demand for aviation insurance products such as  Ground Handlers Liability & Aircraft Fuelling Liability. "With the growing Maintenance, repair and overhaul (MRO) set up & Original Equipment Manufacturers (OEMs) in India, the demand for insurance covers such as Hanger Keepers Liability & Aviation Product liability has gone up. In the last two years, there has been a growth in the segment and we expect it to continue" he said.

Nehra added that the cover limit of the aviation ground handler’s liability insurance in India is generally around $2-5 million, which will increase as international carriers enter the market. "With new routes and new cities being added by aviation companies, the demand for aviation insurance will only go up," he added.

Aviation Liability covers, which are also becoming popular, cover liabilities arising out of ground handling, delays, passenger injury due to accidents, baggage liability and other third party risks. The chief executive officer of a mid-size private general insurance company explained that there could be more than two insurers in the near future providing cover for different segments in the same airport.

This, he added, will open the market for other insurers to enter and expand their services. At present, aviation insurance as a whole constitutes much lower than 10 per cent of the total product portfolio of the non-life companies and is a part of their corporate insurance cover.

Aviation reforms: Government set to waive all charges at regional airports, route review on cards

NEW DELHI: The aviation ministry is about to launch a series of reforms, including eliminating all charges at regional airports, to provide relief to a sector jolted by the recent cut in air safety rating by US authorities.

A senior aviation ministry official said the government will waive all charges related to parking, security, navigation and landing at regional airports. Preliminary estimates suggest that this action will cut the annual expenses of airlines by 10%, said the official who did not want to be named. 

The government will also allow code sharing agreements between scheduled airlines and non-scheduled operators (charter planes, helicopters, etc), an arrangement that allows fliers to enjoy seamless travel on the aircraft of two or more carriers. 

This arrangement will facilitate flights by non-scheduled operators only on routes where scheduled airlines are absent. 

A review of the route dispersal guidelines that require scheduled airlines to deploy at least 10% of their capacity to the North East region, Jammu & Kashmir, Andaman and Nicobar Islands and Lakshadweep to enhance connectivity to these regions too is in the works. Airlines will be permitted to fly in only those routes within these regions that make money. 

The government will also create a corporation to oversee air navigation services, a function currently performed by Airports Authority of India (AAI). An air navigation services bill is being prepared, the official said, adding that the ministry will revisit the Airport Authority of India Act to check for legal obstacles. 

The AAI has to manage around 100 airports in India and separating air navigation services from its duty roster is aimed at improving both tasks. All these reforms will be introduced in two-three weeks, said the official. 

The United States Federal Aviation Administration revised India's air safety oversight ranking from '1' to '2' on January 31 due to the failure of aviation regulator DGCA to hire enough officials to oversee the safe running of flights. The action prevents Air India and Jet AirwaysBSE -0.11 % from increasing flights, partner American airlines or use planes other than those they are now flying, and hampers the expansion efforts of other Indian carriers in other overseas markets. 

On Friday, the DGCA issued a circular to hire flight inspectors who will be paid up to Rs 7 lakh a month as it looks to quickly regain the Category 1 rating. Separately, the DGCA will grant an air operator's permit to AirAsia India on February 15, said the official. On January 13, a joint venture between Malaysia's AirAsia Bhd and the Tatas, was to receive the permit. 

Aviation ministry to seek tax relief for MROs

NEW DELHI: The aviation ministry will seek some exemptions on the service tax for the aircraft maintenance, repair and overhaul (MRO) industry from the finance ministry on Friday, as it tries to make the nascent industry lucrative in India. 

Aviation secretary Ashok Lavasa is scheduled to meet finance secretary Sumit Bose to discuss the issue of a possible relaxation on service tax levied on the MRO industry. 

Currently, MROs in India charge their customers a 12% service tax, which affects their competitiveness when compared to the competitors in the Gulf and South East Asian regions. 

"We see the MRO industry as an important sector for aviation as the number of airlines and aircraft grows in the country," said a senior aviation ministry official. 

"The aviation secretary will discuss with the finance secretary ways to relax the service tax that MROs are forced to charge. Over the past few years, the finance ministry has given number of relaxations to the maintenence, repair, overhaul sector, so we are hopeful they will this time also." 

According to a report from the civil aviation ministry in 2012, the MRO industry's size is expected to increase to Rs 7,000 crore by 2020. 

The MRO industry has been recipient of government sops over the last couple of years. In 2013-14, the government increased the time period for duty-free consumption or installation of parts and testing equipmentimported for MRO of aircraftby units engaged in such activities, for a year. In 2012-13, the government offered similar duty-free imports of aircraft spares. 

Last month, the Reserve Bank of India also notified the MRO sector as an infrastructure sector which would help the industry access low cost loans via external commercial borrowing. 

However, the industry has been asking for a relaxation on the service tax imposed on MRO services to increase the competitiveness of Indian MROs as compared to others in the region. 

Low aviation safety rating to continue as ICAO won't audit India in 2014

NEW DELHI: The International Civil Aviation Organisation said it will not be auditing India in 2014, which would mean the country's low rating with the UN agency will continue for at least another year and half even if the civil aviation ministry manages to hire enough officers to inspect flight operations and train its staff by March.

After its most recent audit — completed on December 31, 2012 — the ICAO rated India's Directorate General of Civil Aviation 57.1 per cent for complying with its standards, well below the global average of 63.5 per cent.

"India has so far undertaken mitigation measures to resolve the safety deficiencies identified by the ICAO, but we will be continuing to monitor the progress to ensure these measures are effective," ICAO spokesman Anthony Philbin said in an email to ET, responding to questions after the US downgraded India's aviation safety rating.

"With regard to a further audit, there is nothing planned over 2014 and our 2015 schedule has not yet been confirmed." The ICAO monitors India's aviation safety oversight capabilities through ICAO Coordinated Validation Missions (ICVM) and two such missions had come to India in 2013.

"The ICVMs help us validate progress made by the member states in resolving any safety deficiencies identified during the ICAO Universal Safety Oversight Audit Programme visits," Philbin said.

Typically, global aviation regulators assess a country's aviation safety going by ICAO's ratings. India's bilateral air services agreements allow regulators of other countries to carry out a safety audit in India.

The same right is accorded to India's DGCA as well. On Friday, the US Federal Aviation Administration, which carries out safety audits to assess whether a country is compliant with ICAO's standards, cut India's aviation safety to category II.

The downgrade means Indian carriers will have to undergo increased checks at US airports. After the US downgrade, Aviation Minister Ajit Singh said that 95 per cent of the issues raised by the US had been resolved by India.

The minister added that the DGCA would be hiring 75 flight operations inspectors trained for specific aircraft models and also train its airworthiness officers to carry out checks on aircraft models used by nonscheduled carriers by March 2014.