Nacil to call for bids for $7 bn cover

Nacil to call for bids for $7 bn cover
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First Published: Mon, Feb 25 2008. 12 35 AM IST
Updated: Mon, Feb 25 2008. 12 35 AM IST
Mumbai: Insurance companies are getting ready to aggresively bid for the country’s largest aviation insurance policy, with a cover of up to $7 billion (Rs28,000 crore) when the National Aviation Co. of India Ltd, or Nacil, into which state-run firms Air India and Indian Airlines were merged last year, floats a tender for the same this week.
All state-owned and private insurance firms are expected to bid for the business and some of them have already started discussions to forge alliances, according to a senior executive with a private sector insurance firm who did not wish to be identified. “Some of these insurance companies have already finalized their partners for this project,” added this executive without divulging further details.
Nacil expects to buy the policy, which will cover 140 planes, at a substantial discount—apart from the number of aircraft involved, its fleet is also young, a factor that goes into pricing. “Last year, Air India alone secured a 30% lower rate to the existing aviation insurance premium as a result of aggressive bidding by insurance companies. We are expecting at least the same level of discounts from insurance companies as Nacil has got a fleet of 140 planes which is growing month by month,” said S. Venkat, executive director, finance at the company.
A request for proposal calling for bids will be floated in late February, he added.
The insurance contract for 2007-08 for Air India was bagged by a consortium led by state-run New India Assurance Co. Ltd with ICICI Lombard General Insurance Co. Ltd as co-insurer. Not everyone is convinced Nacil will seal the insurance deal at a discount.
“No doubt, the bargaining power of Nacil will be more..., since it now has a brand new fleet. But that may not necessarily assure it of huge savings because the insurance market has started hardening,” said an aviation analyst with an international brokerage who did not wish to be identified.
Nacil chairman and managing director Vasudevan Thulasidas said insurance would be the first area where the company would directly benefit from the merger of Air India and Indian Airlines.
“Offering (a) large fleetfor insurance cover will result in huge savings for Nacil. We are likely to get similar benefits in buying jet fuel and common spare parts,” Thulasidas added. Already, Nacil has managed to get at least a 15% discount on existing insurance rates for covering its non-aviation business in 2008-09.
This business was won by ICICI Lombard which scored over state-run insurance companies and private companies.
The entry of private insurance companies into theaviation market has intensified competition in the business, resulting in lower premium rates. Among the privatecompanies expected to bid for the Nacil tender are Bajaj Allianz General Insurance Co. Ltd, ICICI Lombard, Cholamandalam MS General Insurance Co. Ltd and Reliance General Insurance Co. Ltd.
Four public sector insurance firms, Oriental Insurance Co. Ltd, New India Assurance Co. Ltd, United India Insurance Co. Ltd and National Insurance Co. Ltd dominate the aircraft insurance business and cover Nacil’s competitors such as Jet Airways (India) Ltd, Kingfisher Airlines Ltd and Deccan Aviation Ltd.
“Our premium rates are also as good as Nacil because of our high maintenance standards and clean track records. Our insurance rates can even be compared with international airlines such as Singapore Airlines and Lufthansa,” said a Jet Airways executive who asked not to be identified because he is not authorized to speak to the media. Oriental Insurance provides cover for Jet Airways.
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First Published: Mon, Feb 25 2008. 12 35 AM IST