GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
UNSTARRED QUESTION No. 51
TO BE ANSWERED ON 22nd FEBRUARY, 2011/ PHALGUNA 3, 1932 (SAKA)
Air India insurance tender
51. SHRI RAJEEV CHANDRASEKHAR:
Will the Minister of FINANCE be pleased to state:
(a) Whether it is a fact that two entities, namely ICICI Lombard General Insurance and a New India Assurance- led consortium operated as a cartel to bid for and won the Air India Insurance tender;
(b) If so, the details thereof and action taken by Government in the matter; and
(c) The safeguards proposed to be adopted by Government to prevent such instances of cartelization and market manipulation in the future?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)
(a) To (c ): Insurance Regulatory and Development Authority (IRDA) has informed that National Aviation Company of India Limited (NACIL) invited technical bids on 18.8.2010 in respect of aviation policies of the group of NACIL for the year 2010- 11. The NACIL short listed ICICI Lombard General Insurance Co. Ltd., for furnishing the financial quotes for annual premium for the period of 1.10.2010 to 30.9.2011
ICICI Lombard on 10.9.2010 submitted its commercial bid and confirmed that all the terms and conditions of the existing insurance policies under various covers shall be adhered to and all the perils will be covered as per existing policies of 2008-09 and 2009-10. The ICICI Lombard confirmed the acceptance of risk to Air India vide their letter dated 21.9.2010.
ICICI Lombard after acceptance shared this insurance risk on the L1 terms and conditions with New India Assurance Co. Ltd.- led consortium. As per market practice it is normal to accept co- insurance from the lead insurer on L1 terms because of limited capacity in the Aviation segment.
In view of the above, the IRDA has informed that there was no cartelization amongst the insurance companies. Since aviation insurance is a specialized business with large exposures and limited capacity, the insurance companies generally offer risks to other insurers in order to optimally utilize the available capacity.