With its current cover set to expire on April 16, Jet Airways is seeking a cover of around $5.5 billion from the government-owned Oriental Insurance.

According to industry sources, the premium is estimated to be around Rs 70 crore (Rs 700 million), seven per cent higher than last year.

Recently, government-owned Air India's premium rose by around 14 per cent when it went for an annual policy cover.

As against the Rs 109 crore (Rs 1.09 billion) paid for the earlier cover, the national carrier paid Rs 125 crore (Rs 1.25 billion) this time.

The increase in premiums can be seen in the backdrop of the Mangalore air crash and other major aircraft accidents globally, which led to a rise in aviation reinsurance rates all over the world.

Click NEXT to read more...

Under the existing policy, the sum insured for Jet Airways and JetLite was $4.4 billion and $669 million respectively, with the total premium around Rs 65 crore (Rs 650 million), sources close to the development said.

"There has been an increase in aviation reinsurance rates globally, leading to an increase in premiums," said a reinsurance broker.

As far as aviation policies in India are concerned, 85-88 per cent of the risk is reinsured with foreign reinsurance companies as the capacity of domestic general insurers is limited.

Air India, whose policy begins from October 1 every year, went for a cover of around $9.1 billion, compared to the earlier one of $8.9 billion.

Click NEXT to read more...

While ICICI Lombard General Insurance is the lead insurer, the share of the four government-owned general insurers - New India Insurance, Oriental Insurance, National Insurance and United India Insurance - is 40 per cent of the premium.

Consequently, 60 per cent of the risk is borne by ICICI Lombard, with the rest being equally shared by the four general insurers.

Run by the National Aviation Company of India Ltd, Air India is the largest airline operator in India.

"Apart from an increase in fleet size, the Mangalore crash played a major role in the increase in premiums and the cover," said a general insurance official.

With a fleet of 97 aircraft, including its low-cost air service JetLite, Jet Airways is the second largest operator in India.

Click NEXT to read more...

"Jet Airways has been our client since 1994-95. Its present policy expires next month. We are negotiating over next year's policy and are yet to finalise the terms and conditions," said an official at Oriental Insurance.

Without divulging details, he added the premiums would be based on the claims, on-time performance and fleet conditions of the company.

"Jet is highly efficient in terms of its management and operation of fleet. So, apart from the prices quoted in the reinsurance market, the extent of increase in premiums will be linked to that," the official added.

Click NEXT to read more...

The policy would cover three types of risks - aviation hull, terror and war cover, and insurance deductibles, the broker added.

Aviation hull or the basic cover includes aircraft, engines, third-party liabilities, baggages and cargo.

Deductible is the amount of money the insured party must pay before the insurance company's own coverage plan begins.

The terror and war policy covers emergency risks like war or terror incidents.