-Sourav Biswas, Business Head – Aviation Insurance, Alliance Insurance Brokers
Given the current volatile geo-political situation across MENA region and parts of Asia, the criticality of insurance coverage for in the airline/ aircraft operators in India has become more important than before. Most of the airlines/ operators are experiencing challenges such as route disruption, soaring fuel prices, and situational uncertainty. It is therefore necessary to get full insurance cover so that the financial ruin is avoided, given the estimated loss of ₹17,000-18,000 crore by the Indian aviation sector in FY2026.
The airline sector of India serves passengers of over 150 million every year and has been experiencing great difficulty. The closure of West Asian airspace since February 2026 has caused them to take alternative routes that include flying through Pakistan or Central Asia, resulting in 20-30% increase in the consumption of fuel and causing ATF to be at 60% of total costs.
Pilots’ union ALPA has requested the DGCA to ban conflict-zone flights without war-risk proof, highlighting vulnerabilities to missile threats or hijackings. Previously uninsured for such scenarios, airlines now face premiums of ₹30 lakh per narrow-body trip, up to ₹1 crore for wide-body flights.
Why insurance in critical in India for the airline companies
Aviation insurance provides tailored protection against aviation’s high-stakes risks, blending property and liability safeguards. Key components include:
Hull Insurance covers the repair or replacement of the aircraft in case of any accidental damage whether grounded or taxiing on the tarmac or mid-air at 35,000 feet. It is essential for an airline to protect their balance sheet against such unforeseen losses, which can easily run into hundreds of crores.
Third-Party Liability Insurance provides protection against any claims raised by third parties like individuals or property on the ground that are damaged by the aircraft, including injury caused by falling objects, noise-related damage to buildings, and/or runway excursion damage to buildings in the vicinity. This is especially important at crowded airports where you cannot afford to be sued into oblivion.
Passenger Liability Insurance provides compensation for first parties affected due to any physical injury, death, or medical emergency happening on board generally as per provisions Warsaw or Montreal Convention and/or subsequent ratifications. In case of operators carrying 150 million passengers annually across India, this policy covers all aspects from turbulence claims to emergency medical evacuations.
Baggage, Cargo and Crew Insurance covers all claims for lost baggage and/or cargo damage. It also takes care of any accident or injury to pilots and cabin crews even when they are off duty (depending on coverage). The main purpose is to preserve goodwill amid delays owing to any detouring because of a threat of conflict as in case of West Asia route detour.
Hull War Risk Insurance covers physical damage to the aircraft arising out of violent activities. Whilst AVN52E extension in Hull & Liability policy covers the compensation to passengers and affected parties, Hull War Risk Insurance is critical for the operators to avoid huge losses arising out of black swan situations/ incidents.
Indian carriers rely heavily on reinsurance markets in London/ EU due to limited capacity in the domestic market. In times of geo-political volatility, the airline operators are thereby exposed to rate fluctuations in the international markets.
Airline business is a curious business model wherein almost all major expenses (fuel/ spares/maintenance) are in US Dollars while the ticket/cargo booking earnings are in local currency. With stronger USD and a weak local currency, the profit margin of airlines hardly cross the single figure mark. This makes them vulnerable and having adequate Insurance protection is very critical.
In an increasingly volatile geopolitical landscape, aviation insurance has moved from being a regulatory necessity to a safeguard for Indian airlines. As global conflicts are on-going worldwide, these insurance policies can help with financial resilience and even business continuity.
Going forward, a combination of innovative insurance models, domestic capacity building, and technology-driven risk assessment will be key to helping India’s aviation sector navigate uncertainty while sustaining growth.