As geopolitical tensions escalate across regions and skies grow more uncertain, the aviation sector faces renewed scrutiny over the adequacy of its insurance coverages. In an exclusive interview with Fortune India, Amarnath Saxena, Chief Technical Officer – Commercial at Bajaj Allianz General Insurance, shares deep insights into how the industry is responding to new-age risks like war, terrorism, and forced operational halts.

With an eye on global reinsurance markets, Saxena explains the fine print of aviation policies, the role of war risk covers, and how insurers are recalibrating support for airline clients amid unrest. From the complexities of business interruption clauses to risk-sharing frameworks and future premium outlooks, this candid conversation is a must-read for stakeholders in India’s aviation and insurance ecosystems.

Excerpts

Q1. What specific risks related to geopolitical unrest are covered under aviation insurance?

A. In aviation insurance, war and terrorism are typically covered under a separate War Risk Cover, which includes various coverages. Some of the key coverages offered are war, invasion, acts of foreign enemies, hostilities, confiscation, nationalisation by government orders, hijacking, sabotage, strikes, riots, civil commotion, and acts of terrorism. These are not part of the standard hull and liability policy but are opted for additionally. Coverage terms and premiums vary by exposure, area of operations, and also depend on the worldwide reinsurance market. In high-risk periods, specific endorsements and exclusions may be activated based on real-time threat assessments.

Q2. Are airline halts due to government orders or military advisories covered under loss-of-income or business interruption clauses?

A. As per standard market practice, Business Interruption (BI) / loss of income coverage is excluded in standard aviation insurance covers, and even when taken, it doesn’t typically respond to losses due to government-mandated halts unless explicitly covered. These are considered non-damage BI events and are usually excluded unless there's a tailored add-on. However, some larger carriers may negotiate specialized coverage or endorsements that are triggered under civil or military disruptions.

Q3. Are force majeure events or acts of war included or excluded in the standard aviation policy?

A. Acts of war are standard exclusions in aviation hull insurance policies. They are instead covered under dedicated War Risk policies. These require separate underwriting considerations due to the high-severity, low-frequency nature of such risks, which are subject to real-time geopolitical landscapes and are also largely driven by worldwide losses.

Q4. How is the daily loss calculated when operations are suspended due to unrest?

A. Daily loss under aviation-related BI or delay covers is calculated based on a combination of fixed operational costs, aircraft utilisation loss, crew costs, and lost revenue projections, among other factors. It often requires detailed records of aircraft ground time, cancelled schedules, and third-party cost escalations to assess accurately.

Q5. Are these unrest-related risks reinsured globally or handled in-house?

A. Unrest-related risks, especially those under war and terrorism, are typically reinsured through global reinsurers. The capacity and pricing for these risks are influenced by global markets, geo-political situations and Indian insurers like us are ceding these exposures to local and international reinsurers to manage concentration and capital adequacy.

Q6. How does your risk pool or consortium work in situations where multiple airlines file similar claims simultaneously?

A. India currently does not have a separate pool specifically for Aviation War and related risks. However, each airline individually purchases separate war coverage for their fleet and ground operations. A portion of the risk exposure for each insurance program is retained by the Indian insurance market, while the majority is transferred to the global reinsurance market. The global reinsurance market specializes in underwriting these exposures and possesses the capital adequacy and financial strength to pay claims in scenarios where multiple war-related claims accumulate simultaneously.

Q7. Will such unrest and subsequent claims impact future premiums or policy terms for airlines?

A. Insurance/Reinsurance is a dynamic industry that adapts to evolving risk landscapes. In the event of heightened geopolitical tensions or claims activity, insurers, along with reinsurers, may undertake a reassessment of exposure levels. This could potentially lead to a review of policy terms, limits, or pricing based on risk perception and global market conditions. On the contrary, disturbance or war-related claims in other parts of the world can also affect the premiums and coverages for the Indian Market (For example, the Russia-Ukraine War). Any such adjustments are made in close consultation with clients, ensuring transparency and continuity of coverage in line with their operational realities.

Q8. Does Bajaj Allianz offer any advisory or risk management support to airline clients in such high-risk periods?

A. At Bajaj Allianz General Insurance, we believe in supporting our clients beyond just offering coverage. In times of elevated risk, our teams work closely with airline clients to help them understand their policy framework and explore ways to strengthen operational resilience. This may include guidance on risk awareness, potential mitigation strategies, and clarity on claim procedures, tailored to the evolving risk environment and in alignment with regulatory and industry best practices.