Iran conflict: Airspace closures strain aviation insurers

Mumbai: Aviation insurers are relieved that no passenger aircraft has suffered any damage in the ongoing conflict in West Asia. However, widespread airspace closures across the region and largescale flight cancellations are placing the market under operational strain, which could trigger a rise in aviation war-risk premiums, impacting available aircraft capacity.

"Aviation is purely the key risk, and capacity may shrink," said Sandeep Dadia, CEO and country head at Lockton India. Airlines tend to take hull and liability cover for planes, usually less than 1% of the sum assured. For air travellers, those who bought trip cancellation cover under travel policy may attempt to file claims. However, most travel insurance policies exclude losses arising from war or acts of war, leaving coverage dependent on specific wording and cause-of-loss interpretations. "With over 700 flights cancelled in Dubai alone and airspace closures across Iran, Iraq, and Israel, the aviation hull and liability market is under duress," said Prateek Singhal, executive president and head of reinsurance at Howden Insurance.

Airlines may still face refund obligations under consumer protection regulations, even if insurance recoveries are limited. "Loss of revenue is not covered under aviation policies," an industry official said.