Aviation Insurance

Md. Mizanur Rashid

General Manager
Revenue & FMIS
Biman Bangladesh Airlines
1
• Insurance Overview.
• Basic Concepts Regarding Insurance.
• Types of Insurance.
• Aviation Insurance Policy
• Non Aviation insurance Policy
• CONVENTION – For the unification of certain rules for
international carriage by Air

2
 What Is Insurance?
➢ Insurance is a mechanism by transferring risk by
replacing uncertainty by certainty.
➢ The aim of insurance is to:
1. Reduction of Risk.
2. Prevention of Loss.

3
 Historical Development Of Insurance

Insurance in some form is as old as historical society. So-

called Bottomary contracts were known to merchants of Babylon as
early as 4000–3000 BCE. Bottomary was also practiced by the
Hindus in 600 BCE and was well understood in ancient Greece as
early as the 4th century BCE. Under a Bottomary contract, loans were
granted to merchants with the provision that if the shipment was lost
at sea the loan did not have to be repaid. The interest on the loan
covered the insurance risk. Marine insurance became highly
developed in the 15th century.

4
 Historical Development Of Insurance
Fire insurance arose much later, obtaining impetus from the Great
Fire of London in 1666. A number of insurance companies were
started in England after 1711, during the so-called bubble era. Many of
them were fraudulent, get-rich-quick schemes concerned mainly with
selling their securities to the public. Nevertheless, two important and
successful English insurance companies were formed during this
period—the London Assurance Corporation and the Royal
Exchange Assurance Corporation. Their operation marked the
beginning of modern property and liability insurance.

5
 Historical Development Of Insurance
Early development of insurance in Europe would be incomplete without
reference to Lloyd’s of London, the international insurance market. It began
in the 17th century from the coffee house of Mr. Edward Lloyd’s as a
coffeehouse patronized by Owner of Ships for recovering the loss arised by
accidents. Gradually Merchants, Bankers and other financially solvent
persons agreed to meet up the risks. Lloyd’s was reorganized in 1769 as a
formal group of underwriters accepting marine risks. With the growth of
British sea power, Lloyd’s became the dominant insurer of marine risks, to
which were later added fire and other property risks. Today Lloyd’s is a
major reinsurer as well as primary insurer, but it does not itself transact
insurance business; this is done by the member underwriters, who accept
insurance on their own account and bear the full risk in competition with
each other through Brokers.
6
 Basic Concepts Of Insurance
➢ Functions of an Insurance Company
✓ Provides Reliability
The main function of insurance is that eliminates the uncertainty of
an unexpected and sudden financial loss. Instead of this uncertainty,
it provides the certainty of regular payment i.e. the premium to be
paid.
✓ Protection
Insurance does not reduce the risk of loss or damage that a company
may suffer. But it provides a protection against such loss that a
company may suffer. So at least the organization does not suffer
financial losses that debilitate their daily functioning. 7
 Basic Concepts Of Insurance
➢Functions of an Insurance Company
✓ Pooling of Risk
In insurance, all the policyholders pool their risks together. They all
pay their premiums and if one of them suffers financial losses, then
the payout comes from this fund. So the risk is shared between all of
them.
✓ Legal Requirements
In a lot of cases getting some form of insurance is actually required
by the law of the land. Like for example when goods are in freight, or
when you open a public space getting fire insurance may be a
mandatory requirement. So an insurance company will help us fulfil
these requirements. 8
 Basic Concepts Of Insurance
➢Functions of an Insurance Company
✓ Capital Formation
The pooled premiums of the policyholders help create a capital for the insurance
company. This capital can then be invested in productive purposes that generate
income for the company.

➢Principles of Insurance
✓ Utmost Good Faith
A contract of insurance must be made based on utmost good faith ( a contract of
(Uberrima fides). It is important that the insured disclose all relevant facts to the
insurance company. Any facts that would increase his premium amount, or would
cause any prudent insurer to reconsider the policy must be disclosed. If it is later
discovered that some such fact was hidden by the insured, the insurer will be within
his rights to void the insurance policy.
9
 Basic Concepts Of Insurance
➢Principles of Insurance
✓ Insurable Interest
This means that the insurer must have some pecuniary interest in the subject matter
of the insurance. This means that the insurer need not necessarily be the owner of
the insured property but he must have some vested interest in it. If the property is
damaged the insurer must suffer from some financial losses.
✓ Indemnity
Insurances like fire and marine insurance are contracts of indemnity. Here the
insurer undertakes the responsibility of compensating the insured against any
possible damage or loss that he may or may not suffer. Life insurance is not a
contract of indemnity.
✓ Subrogation
This principle says that once the compensation has been paid, the right of
ownership of the property will shift from the insured to the insurer. So the insured
will not be able to make a profit from the damaged property or sell it.

10
 Basic Concepts Of Insurance
➢Principles of Insurance
✓ Contribution
This principle applies if there are more than one insurers. In such a case, the
insurer can ask the other insurers to contribute their share of the compensation. If
the insured claims full insurance from one insurer he losses his right to claim any
amount from the other insurers.

✓ Proximate Cause
This principle states that the property is insured only against the incidents that are
mentioned in the policy. In case the loss is due to more than one such peril, the one
that is most effective in causing the damage is the cause to be considered.
 Insurance Policies of Biman
➢ Insurance Section deals with Aviation & Non-aviation (except Medical
Insurance) Insurance which are maintained efficiently and effectively with
Home & Aboard based on insurers & reinsurers. Insurance Section ensures the
safety of all aircrafts, employees as well as tangible assets of Biman by
insurance coverage.
Work Process of Insurance

Renewal

Insurance
Process

Claim settlement Payment

 Aviation Insurance Policy
➢ Aviation insurance is insurance coverage geared specifically to the operation of
aircraft and the risks involved in aviation. Aviation insurance policies are
distinctly different from those for other areas of transportation and tend to
incorporate aviation terminology, as well as terminology, limits and clauses
specific to aviation insurance.
➢ Aviation Insurance was first introduced in the early years of the 20th century.
The first-ever aviation insurance policy was written by Lloyd's of London in
1911. The company stopped writing aviation policies in 1912 after bad weather
at an air meet caused crashes, and ultimately losses, on those first policies.
➢ In 1929, the Warsaw Convention was signed. The convention was an agreement
to establish terms, conditions, and limitations of liability for carriage by air; this
was the first recognition of the airline industry as we know it today.
 Aviation Insurance Policy
➢ Aviation insurance is insurance coverage geared specifically to the operation of
aircraft and the risks involved in aviation. Aviation insurance policies are
distinctly different from those for other areas of transportation and tend to
incorporate aviation terminology, as well as terminology, limits and clauses
specific to aviation insurance.
➢ Aviation Insurance was first introduced in the early years of the 20th century.
The first-ever aviation insurance policy was written by Lloyd's of London in
1911. The company stopped writing aviation policies in 1912 after bad weather
at an air meet caused crashes, and ultimately losses, on those first policies.
➢ In 1929, the Warsaw Convention was signed. The convention was an agreement
to establish terms, conditions, and limitations of liability for carriage by air; this
was the first recognition of the airline industry as we know it today.
 Aviation Insurance & Re-Insurance process of Bangladesh Biman

As per Insurance Corporation Act of 1973

"Public property is to be insured with the Sadharan Bima Corporation only. So,
Aviaton Insurance of Biman Bangladesh Airlines Ltd. is 100% Insured with SBC.

➢ Due to Financial Limitation to bear the risks, SBC re-insured the aviation
insurance with re-insurer through international recognized “Brokers”.
➢ The re-insurer (underwriters) of Lloyd’s International Insurance market of
London never directly involve with the actual insured. All formalities of re-
insurance is performed by international top rated insurance broker.
➢ At first a broker selection committee is formed to select the top rated broker by
the representatives of Biman, SBC, MOCAT and MOF.
➢ Biman Provide Aircraft, Engine, Spares and other information to SBC.

Contd…
 Aviation Insurance & Re-Insurance process
➢After Selecting the broker SBC offer “Request for Quotation (RFQ)” to the
brokers with details information provided by Insured
➢Then Brokers provide all the information to Re-insurer (underwriters) and Top-
Rated “Lead Underwriters” evaluate the information and advised the brokers.
Brokers submit their Quoted offer to SBC.
➢Tender Evaluation Committee formed by representatives of Biman, SBC,
MOCAT and MOF. TEC Evaluate all the quotations and negotiate with
responsive bidders. After final negotiation TEC submit a proposal to SBC. The
Board of Directors of SBC finally select the brokers and offer them for
placement.
➢In order to ensure the settlement of claim in the earliest possible time Re-
insurer/Lead underwriters and Brokers should be Top-Rated and well
Recognized.
➢As SBC is engaged with the overall Insurance & Re-insurance process, SBC
itself receives Re-insurance Commission from Re-insurance Broker.
 Collection of Insurance & Re-Insurance Certificate

➢After placement Re-insurer (Broker) issue Re-insurance

certificate to SBC and SBC issue Biman Bangladesh Airlines
Ltd. insurance Certificate for risk coverage.
➢All these Certificates need to be provided to all Financer,
Lessors and Regulatory Authorities and other related parties
worldwide.
 Aviation Insurance Policy

➢ Generally four (4) types of aviation insurance policy is maintained

with Sadharan Bima Corporation (SBC) which is reinsured with
UIB(United Insurance Brokers)

1. Hull All Risks & Spares

2. Hull Liabilities
3. Hull War Risks/AVN 52E Excess War
4. Hull Deductible.
 Hull All Risks & Spares Policy
➢ This Policy is designed to protect the Insured against the physical loss or
damage to an aircraft, including engines and other fitted parts. Insurers will
undertake at their option, to pay for, replace, or repair physical loss of or
damage to your aircraft, arising from the risks covered, up to an agreed value
and subject to any deductible (an amount of money you will contribute to any
claim).
➢ Exclusions
✓ It does not cover loss or damages to any part of an aircraft or to Spares and
Equipment which is due and confined to wear and tear, deterioration,
breakdown, defects or failures (DoD) not FOD.
✓ War, Hi-Jacking and other perils are excluded as per Exclusion Clause- AVN
48B, Nuclear Risks Exclusion Clause AVN 38B, Date Recognition Exclusion
Clause AVN 2000A, Contracts (Rights of Third Parties) Act 1999 Exclusion
Clause AVN 72.
 Hull All Risks & Spares Policy
➢ Limits of Insurers’ Liability
✓ Maximum Agreed value for any one Aircraft is USD 225,000,000.
✓ Buyers furnished equipment up to a maximum of USD 5,000,000 for any one
aircraft/ Location.
✓ Flight Spares kit up to a maximum of USD 2,000,000 any one kit.
✓ Passengers in-flight entertainment systems up to a maximum of USD 10,000,000
any one system all within the agreed value of each Aircraft.
✓ For Spares and Equipment USD 75,000,000 any one occurrence but USD
40,000,000 any one item.
The amount to be borne by the insured in respect of loss or damage to Aircraft under
Hull is:
Aircraft Type Amount Each Loss
Boeing 787/B777 USD 1,000,000
Boeing 737-800 USD 750,000
Dash 8 Q400 USD 100,000
Other Types To be agreed by insurers prior
to attachment
 Hull Liability Policy
Hull liability insurance policy protects against all physical loss or damage risks.
This includes Physical damage of
✓ Owners, operators, passengers,
✓ Baggage and cargo carried on the aircraft
✓ Medical coverage for passengers, pilots and crew members
✓ Aircraft third party liability—damage to individuals or property outside of the
aircraft itself
➢ Exclusions
This policy doesn’t cover the insured’s liability unless it arises from one or more of
the following:
✓ Occurrences involving Aircraft or parts or equipment relating thereto
✓ Occurrences Arising at Airport including body injury, property damage.
✓ Occurrences arising any other location in connection with insured’s business of
transporting passenger, goods or services
✓ Occurrences arising out of the supply of goods or services which are essential
for the operation of aircraft and goods which are customarily used in the air
transport Industry
 What does hull insurance cover on
an airplane?
Aircraft aren't covered under standard liability policies.
Aircraft liability coverage typically covers bodily injuries to
passengers and third parties and property damage to third
parties. Aircraft hull insurance covers physical damage to
the airplane.

23
 Hull Liability Policy
➢ Limits of Insurers Liability
✓ Combined single limit for body injury/property damage/personal injury USD.
1,250,000,000 (787-8/9) any one Occurrence.
✓ In respect of Boeing-777 aircraft USD. 1,000,000,000 any one occurrence.
✓ In respect of Boeing 737-800 registrations S2-AFL, S2-AFM, S2-AHO, S2-
AHV aircraft USD. 650,000,000 any one Occurrence other than Flights to/from
Hong Kong USD. 1,000,000,000.
✓ Liability limit for Boeing 737-800 aircraft registrations S2-AEQ and S2-AEW
USD 750,000,000 any one occurrence (Extended as per requirement of lessor)
✓ Dash 8 Q400 aircraft USD 275,000,000 any one occurrence.
✓ Personal injury Liability is subject to a limit of USD. 25,000,000 in the annual
aggregate.
✓ In respect of death of Passengers for domestic/regional travel USD 160,000 and
the total applicable limit will not exceed the annual aggregate. But in no event
exceeding USD. 1,250,000,000.
 Hull Liability Policy
➢ Deductions:
The insured shall bear the following amounts as a deduction or supplementary
payments. In respect of property damage to:
✓ Baggage and personal Effects USD. 1250 any one Occurrence.
✓ Cargo USD. 10,000 any one occurrence.
✓ The above amounts are not applicable in respect of claims for property damage
arising from:
1. An accident to the aircraft or other means of transport in which such baggage
or cargo is being carried.
2. Fire, wind, tornado, cyclone, typhoon, flood, hail, theft, lighting, explosion,
earthquake or tidal wave.
3. Under Endorsement No. 1 -Extended Coverage Endorsement (Aviation
Liabilities) AVN52E.
Any property damage in respect of aircraft which are in the care, custody or control
of the insured are being serviced, handled or maintained by the insured whilst such
aircraft are in Flight are subject to the same deductible that would be applicable if
the Aircraft are insured Hull and Spares coverage.
 The Air Transport (Montreal Convention 1999) Bill 2020

➢ The Air Transport (Montreal Convention 1999) Bill 2020 has been passed
in parliament, to pave the way for an air passenger to get some $160,000
(SDR 100,000) or Tk1.4 crore as compensation in case of death.
➢ The bill, will give protection to the air passengers. Under the bill,
passengers will get compensation for death and injuries, damages or delay
of baggage and cargo goods.
➢ Some $160,000 has been proposed as compensation for the death of a
passenger, while $70 for damaging a kilogram of baggage materials and
$27 for damaging a kilogram of cargo goods, the bill said.

According to the bill, the punishment for the violation of any provision of the
bill by any airline would be maximum 10 years’ jail or Tk 100 crore fine.

26
Hull War Risks/AVN 52E & Excess Liability Policy
Hull War & Allied Perils Covers loss or damage to the Aircraft which is specifically
excluded under the Hull All Risks policy by virtue of the War Risks Exclusion
Clause.
➢ Risks covered include:
✓ war, invasion, acts of foreign enemies, hostilities (whether war be declared or
not).
✓ civil war, rebellion, revolution, insurrection, martial law, military or usurped
power or attempts at usurpation of power, strikes, riots, civil commotions or
labor disturbances, political or terrorist acts, malicious acts, sabotage,
confiscation, nationalization, seizure, restraint, detention, appropriation,
requisition for title or use by or under the order of any Government (whether
civil military or de facto) or public or local authority and hi-jacking.
✓ Furthermore, the War Risks policy extends to include the coverage suspended
under the Hull All Risks policy, arising whilst the Aircraft is outside the control
of the Insured by reason of any of the above perils.
Hull War Risks/AVN 52E & Excess Liability Policy
➢ Exclusions:
The insurers shall not be liable to make any payment under this insurance as a result
of the inability, refusal or failure to pay of the primary insurers for any reason
including without limitation, any financial impairment, insolvency or liquidation.
This Insurance does not apply to claims excluded by:
✓ The Nuclear Risk Exclusion Clause AVN 38B.
✓ Noise and Pollution and other Perils Exclusion Clause AVN 46B applicable as
per primary Insurance.
✓ Date Recognition Exclusion Clause AVN 2000A.
✓ Contracts ( Rights of Third Parties) Act 1999 Exclusion Clause AVN 72.
✓ The Asbestos Exclusion Clause 2488 AGM00003.
Hull War Risks/AVN 52E & Excess Liability Policy
➢ Limits of Liability

A combined single limit ( Bodily Injury/ Property Damage) of USD 250,000,000

any one Occurrence, applicable Separately to each of the Insured’s Boeing-787
aircraft in respect of the insured’s liability arising out of the ownership, operation or
use of aircraft, and in the annual aggregate.
In respect of Non-Aircraft Liability:
✓ A combined single limit (Bodily Injury/ property damage) of USD. 250,000,000
any one occurrence and the annual aggregate.
✓ The above limits applying separately in respect of each aircraft owned, operated
or used. Subject to an overall aggregate limit of USD. 250,000,000.
Excess Non-Aviation Liability Coverage USD. 25,000,000 any one occurrence.
This limit applies in the aggregate in respect of each hazard insured with an
aggregate limit under the underlying insurance.
 Deductible Policy
Aircraft insurance policies generally have a policy deductible amount as
standard, in a similar way to a policy excess under a motor car or home
insurance policy.
Aircraft insurance policies apply a deductible under the hull section, which
covers physical loss of or damage to the aircraft.
The purpose of aircraft hull policy deductibles – either expressed as a fixed
amount or percentage of the agreed value of the aircraft each claim is two-
fold; to encourage the policy holder to protect their aircraft as they are
responsible for the first part of a claim and to “remove” the Insurer(s) from
paying small claims where the cost of handling these claims is
disproportionate to the amount claimed.
Depending on the amount or percentage deductible, an owner or operator
may choose to increase or reduce their deductible. Any change is likely to
result in an adjustment to the premium charged.
 Deductible Policy

➢ For each and every loss (Hull Amount)

Boeing-777/Boeing-787 Aircraft USD.-1,000,000
Boeing-737-800 Aircraft USD.-750,000
Dash 8 Q400 Aircraft USD.-100,000
Excess:
➢ For Each and every loss (Deductible Amount)
Boeing-777/Boeing-787 Aircraft USD.-100,000
Boeing-737-800 Aircraft USD.-100,000
Dash 8 Q400 Aircraft USD.- 50,000
 Rate of Insurance premium
Aviation Insurance
Premium Rate (2021-2022)

Risk Aircraft HAR(80%) HTLO(20%)

Boeing 787 0.4931% 0.3945%
Boeing 777 0.4931% 0.3945%
Hull
Boeing 737-800 0.7472% 0.5978%
Dash-8 Q400 0.7472% 0.5978%
Spares All Aircraft 0.164175%
Hull War All Aircraft 0.031417% 0.0251%
$
Boeing 787/777 47,323.00
$
Hull Deductible
Boeing 737 22,573.00
$
Dash-8 Q400 4,465.00
International Regional Domestic
$ $ $
Liability Passenger 2.18 1.94 1.94
$ $ $
Departure 68.80 57.25 57.25 32
 Insurance Broker - Role
• Lloyd’s brokers – financial stability and professional
conduct
• Specialized knowledge & expertise
• Acts as an agent of the insured
– Delivering policy
– Collection of premiums
– Placing slip
– Selection of underwriter with a quote of reasonable
premium
– Offer underwriter proportion of the insurance to be
written
– Underwriter will accept a portion of the risk and sign the
slip
– The underwriter will become known as the leading
underwriter or “leader” Contd…
33
 Insurance Broker - Role
• Issuance of an insurance policy or cover note
to the insured
• Financiers – certificate of insurance & letter of
undertakings
• Certificates are invariably issued “subject to
policy terms, conditions, limitations,
warranties and exclusions.”

34
London Insurance Broker list

35
 Aviation Insurance Claims

❑ Hull Claims
Aviation Hull claims are far more clear cut and subject to less negotiation than
marine Hull claims.
This is due to Several factors including:-
✓ Standardization of Aircraft Types
✓ Strict regulations by Civil Aviation Authorities. This leaves very little choice
as to how the aircraft will be repaired.
✓ Limited choice of approved repairers.
✓ Single source of parts supplier ( for example, GE fan blades for GE engine)
 Aviation Insurance Claims

a) Total Losses ( Contested Total Loss)

If the aircraft is declared as a total loss, then the full amount of lien should be
paid off and the bank/lessor should not have a problem (other than that a
performing lease has been prematurely terminated). It is normal to insist upon
an agreed value of 110% to 120% of the financed amount outstanding, this
ensures that banks/lessors costs and lost revenues are recovered.

Some losses are borderline cases between being a total loss or large partial loss.
For example, if a Boeing 787-900 insured for $150,000,000.00 sustains
$130,000,000.00 worth of damage, the airline operator and financiers may not
wish for it to be repaired. They will try to negotiate for a total loss, with the
underwriters retaining salvage. The long term desirability of an aircraft that has
suffered serious damage is questionable. If underwriters argue, it is better to
have an agreed threshold i.e. if repair cost exceed 75% of the agreed value
beyond which the aircraft will be declared as total loss.
 Aviation Insurance Claims
➢ Engine Leases
When an aircraft suffering a loss which is fitted with a borrowed or
replacement engine; the engine not being subject to the aircraft lease in
question. In such circumstances the agreed value of the aircraft should be
increased to include the value of the replacement engine. Then
underwriters will pay a total loss for the increased agreed value and take
the replaced engine as salvage. If the value has not been increased, then
the respective owners of the engines may become embroiled in a dispute
as to the distribution of claim proceeds.
 Aviation Insurance Claims
b. Partial Losses
Following partial losses, financiers will want to ensure that the repairs are carried out
to their satisfaction. For this reason leases contain loss payable clauses that typically
require for Claim proceeds, over a stipulated amount, to be paid directly to the
bank/lessor.
Normal practice is that claims are paid directly to the repairer and this is reflected
directly in the language of AVN67B.
Aircraft financiers should be aware of certain potential problems in dealing with partial
loss adjustment and repair:
➢ “Betterment” may be applied.
If an old engine is damaged and the replacement parts are new, and of higher value
than the old discarded parts, underwriters may deduct a betterment factor from the
claim payment.
➢ “Choice of Repairer”
The aircraft financier does not have the right to insist upon a chosen repairer. Insurers
will seek to repair the damage in most economic way but will be bound to use an
approved repairer. This would typically be an FAA/JAA/CAA or equivalent licensed
repair station.
 Aviation Insurance Claims

❑ Liability Claims
Liability claims are usually settled directly by insurers with the plaintiffs, without
the operator or financier being involved. Banks/ Lessors are advised to steer clear
of liability issue. The provisions of “Cut Through Clause” should only be
applicable to hull claims.
If a claim payment, destined for a dependent of a deceased passenger, were to be
inadvertently held up within a bank’s/lessor’s accounting process, this could
attract un-quantifiable liability suits for bad faith.
 CASE-1
Frank takes John for a ride in his aircraft. During
the flight the engine quits and Frank makes an
emergency landing on a road. During the landing
John is injured and the driver of a car on the road
is also injured. Frank’s aircraft liability insurance
is $1,000,000 per occurrence with a sub-limit of
$100,000 per passenger. The aircraft insurance
company pays $100,000 for John’s claim and
$700,000 to the driver of the car for injuries. The
insurance company also pays $25,000 for
damage to the car.
41
 CASE-2
Steve invited his friend Susan to take a short flight
to a nearby airport for lunch on Saturday. During
the landing at the destination airport Steve over-
shoots the turn to final and stalls and the aircraft
crashes into a park just outside the airport. Steve
and Susan are both seriously injured and a group
of people in the park are also injured. The aviation
insurance company who insured Steve will apply
the full limit of $1,000,000 as necessary to settle
all of the claims that may arise for the accident.

42
 CASE-3
Alice takes Mary for a ride in her aircraft. Alice didn’t realize
the lineman at the FBO did not properly secure the fuel
caps and the engine quit when all of the fuel drained out
during the flight. Alice did a great job making an emergency
landing on a golf course but unfortunately Mary and one of
the groundskeepers working at the golf course are injured.
Alice’s aircraft insurance policy has a $100,000 per person
sub-limit on the aircraft liability insurance. The insurance
company pays Mary $100,000 and $100,000 to the
groundskeeper; however, the groundskeeper has over
$700,000 in medical expenses and is not expected to be
able to work for an extended period. All told, the attorney
representing the groundskeeper is seeking $900,000 from
Alice but her aircraft liability insurance is exhausted
because of the $100,000 per person sub-limit. 43
 CASE-4
US Bangla Airlines alleged that on 11.03.19 damage was
sustained to their Aircraft DHC-8, S2-AGX at Hazarat
Shahjalal International Airport (HSIA), Dhaka. The incident
happened while Biman Bangladesh Airlines 777-300ER S2-
AHN aircraft take-off hit the Engine & Radar of US-Bangla
Aircraft. US Bangla claim was US$ 82,200 from Biman.
Insurance company requested Biman to settle the issue
with US-Bangla. Biman refused to do so. In the process,
Insurer Marsh and Surveyor CTA involved and assessed
the damage. CTA (Chares Taylor Adjusting) has quantify
the claim and finally advised plaintiff to settle the issue with
the Full, Final release, Discharge of payment for an amount
US$ 52198. US Bangla Agreed to close the claim.

44
CASE-5 (TLO)

45
 Claim Settlement
➢ After getting incident/accident information from concern sections, instantly inform to
Insurance/Re-insurance Company for necessary action. After receiving information from
Biman, Insurance/Re-insurance and their surveyor send Aircraft Accident Questionnaire
(AAQ).
➢ To make correspondence and provide all information as per demand of Insurance/Re-
insurance and their surveyor. After fulfill their requirements they issue Memorandum of
Settlement (MOS) as per insurance policy.
➢ After getting Memorandum of Settlement, place to management for approval. After
management approval arrange to sign in Biman copy and collect others sign (Lessors
and SadharanBima Corporation). After complete of all signature on MOS finally send to
re-insurer and their Surveyor and continuously communicate with re-insurer and
surveyor for collection of settled claim amount as per insurance policy.
➢ Complete all formalities file kept preserve for future reference and audit purpose.
➢ For the Insurance period from 16-10-2019 to 15-10-2020 and 16-10-2020 upto 30th
April,2021 Biman has no claim against aviation insurance policy.

46
 Collection of Insurance & Re-Insurance Certificate

➢ After placement Re-insurer (Broker) issue Re-insurance certificate to

SBC and SBC issue Biman Bangladesh Airlines Ltd. insurance
Certificate for risk coverage.
➢ All these Certificates need to be provided to all Financer, Lessors and
Regulatory Authorities and other related parties worldwide.
 Premium Payment Procedure
➢ Biman pays insurance premium as per the recommendation of Tender
Evaluation Committee (TEC) which is approved by BOD of SBC.
➢ SBC place payment advice (invoice) to Biman and request to make payment
directly to the Re-insurer Broker in foreign currency (USD) for their portion
and rest of the amount to SBC portion in local currency. All the payments are
made through 4 Installments.
➢ The amount of Aviation Insurance premium for the year 2020-2021 (Policy
period: 16th October,2020 to 15th October, 2021) is USD. 11,200,000. And
proposed Composite premium for 20251-2022 is USD. 12,440,000.00
➢ As advised by SBC Biman is paying to Ms. Marsh Ltd. USD. 9,801,825.00 and
USD. 1,398,175.00 to SBC for the Policy period 2020-2021.
Types of Insurance
 Life Insurance
Life Insurance refers to a policy or cover whereby the policyholder can ensure
financial freedom for his/her family members after death. Suppose you are the sole
earning member in your family, supporting your spouse and children. In such an
event, your death would financially devastate the whole family. Life insurance
policies ensure that such a thing does not happen by providing financial assistance
to your family in the event of your passing.
➢ Types of Life Insurance Policies
✓ Term Plan - The death benefit from a term plan is only available for a specified
period, for instance, 40 years from the date of policy purchase.
✓ Endowment Plan - Endowment plans are life insurance policies where a portion
of your premiums go toward the death benefit, while the remaining is invested
by the insurance provider. Maturity benefits, death benefit and periodic bonuses
are some types of assistance from endowment policies.
✓ Pension Plan - Also known as pension plans, these policies are a fusion of
investment and insurance. A portion of the premiums goes toward creating a
retirement corpus for the policyholder. This is available as a lump-sum or
monthly payment after the policyholder retires.
 Life Insurance
✓ Whole Life Insurance - As the name suggests, such policies offer life cover for
the whole life of an individual, instead of a specified term. Some insurers may
restrict the whole life insurance tenure to 100 years.
✓ Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of
your insurance premiums go toward mutual fund investments, while the
remaining goes toward the death benefit.
✓ Child’s Plan - Investment cum insurance policy, which provides financial aid
for your children throughout their lives. The death benefit is available as a
lump-sum payment after the death of parents.
✓ Money-Back - Such policies pay a certain percentage of the plan’s sum assured
after regular intervals. This is known as survival benefit.
 General Insurance
Insurance contracts that do not come under the ambit of life insurance are called
general insurance. The different forms of general insurance are fire, marine, motor,
accident and other miscellaneous non-life insurance.
➢ Types of General Insurance
Almost everything is insurable. However, General Insurance in India is bifurcated
as Fire, Engineering, Marine and Miscellaneous Insurance. Let us look at them as
per the use and general acceptability. Following are the different types of General
Insurances:
✓ Health Insurance
✓ Travel Insurance
✓ Motor Insurance
✓ Marine Insurance
✓ Home Insurance
✓ Commercial Insurance
Digit Insurance also offers insurance policies for Mobile, Bicycle, Shop Protection,
and others.
 General Insurance
➢ Health Insurance
The Health Insurance cover from Digit offers protection for the medical expenses
incurred due to hospitalization caused because of an accident or illnesses. Although
every policy is different, based on who it's being purchased for, it mainly covers:
✓ Accidental Hospitalization (pre & post)
✓ Daycare procedures
✓ Accidental illness and hospitalization
✓ Daycare procedures
✓ Psychiatric Support
✓ Annual Health Checkups
✓ Daily Hospital Cash
The cover can be extended to cover the Maternity benefit with Infertility benefit,
Critical Illness, Organ Donation, Alternate Treatment with some predefined
conditions such as: Age, pre-existing illness, Lifestyle Habits, Type of coverage,
Family health history. on the basis of:
 General Insurance
➢ Travel Insurance
It covers your financial liability, if any, when you travel within or beyond the
Bangladeshi boundaries. The financial liability may arise due to medical or non-
medical emergencies.
The duration of the travel for one time can be 180 days at the maximum. The
policyholder can take more than one trip in a year. Your Travel Insurance will
cover Loss of Baggage, Loss of Passport, Hijacking, Medical Emergencies,
Delayed Flights, Accidental Deaths, Adventure Sports.
➢ Motor Insurance
A Motor Insurance Policy is mandatory to be able to drive legally in India. Broadly
there are two types a) Third-Party Liability b) Comprehensive Package Policy.
✓ Third-Party Policy covers for losses faced in a situation where your vehicle
damages any third-party such as a public property, person or third-party vehicle.
The same is the minimum requirement to be able to drive legally in
Bangladesh, as stated by the Motor Vehicles Act.
 General Insurance
✓ Comprehensive Package Policy covers both third-party damages and liabilities and
damages/losses caused to you and your own vehicle. The losses may arise due to an
accident, theft, fire, natural calamities, and others. Digital Insurance provides some
add-ons under its Comprehensive Package Policies for Cars and Bikes that act as
additional shields to your vehicle, such as: Tyre Protect Cover, Zero Depreciation
Cover, Return to Invoice, Engine and Gearbox Protection, Breakdown Assistance
Cover.
➢ Home Insurance
You build your home with your toil and hard earned money. Everything you buy is a
priceless possession for you and hence it needs to be protected. A Home Insurance
Policy protects your valuable and other assets. It is a comprehensive package policy
that covers all valuables. Digit Insurance gives protection for Home against Burglary,
Loss/Damage of Jewelry, Fire and Natural Disasters.
➢ Commercial Lines
The lines of insurance that affects the business operations in the real terms are
categorized under the Commercial Lines of Insurance. Type of the insurance covers
that one can buy may include: Property Insurance Engineering Insurance Liability
Insurance, Marine Insurance, Employees Benefit, Insurance Business Interruption.
 NON-AVIATION INSURANCE
Group Term Insurance (GTI)

Renewal

Group
Term
Insurance
(GTI)
Claim
Payment
settlement

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 Group Term Insurance (GTI)
Renewal & Payment:
➢ Before expiry of Group Term Insurance (GTI) policy period, Insurance Section
collect employees details list from Payrolls Section (as on 1st February to 3rd
March) check and verified the employees list and submit final employees list to
Jiban Bima Corporation (JBC) for coverage of group term insurance.
➢ After getting information from Biman, Jiban Bima Corporation (JBC) checked
and verified the final employees list and submit premium bills for payment
action.
➢ Insurance Section check, calculate & certified Group Term Insurance (GTI)
premium bills received from Jiban Bima Corporation (JBC) & process file for
management approval.
➢ For the year 04/03/2020 to 03/03/2021 (2020-2021) total paid premium is BDT.
2,46,03,041.00 and for the year (2021-2022) total paid premium is
2,55,64,603.00 for 3,546 employees upto September,2021.
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 Group Term Insurance (GTI)
Claim Settlement
Group Term Insurance (GTI) claim settlement process:
Received
employee's
death certificate

Make payment
Claim to JBC
to beneficiary

Collect
Received
management
claimed amount
Approval

Received
beneficiary
documents

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 Group Term Insurance (GTI)
Claim Settlement
➢ After getting the employees Death certificate from beneficiary send the same with a
request letter to JBC for process the claim within three working days.
➢ After getting death certificate and request letter JBC verifies the claim with
documents and sends Letter of Liability. Insurance Section provides to JBC the same
Letter of Liability with signed and sealed on Stamp within three working days. After
verification JBC finally issued cheque in favor of Biman Bangladesh Airlines as per
GTI Policy. Insurance section collect the cheque and arrange to deposit in Biman
Bank account through Cash and Banking Section.
➢ Process file for obtaining management approval on payment of GTI claims to
beneficiary/beneficiaries. After management approval arrange insurance section
arrange to make payment the same to nominee/nominees of death
employee/employees within 7-8 working days.
➢ Total claim amount is BDT 2,25,00,000.00. and for year 04/03/2020 to 03/03/2021
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(2020-2021) and for the year 2021-2022 total number of claim is 08.
 NON-AVIATION INSURANCE
Marine Insurance (1st Step)

Received
documents from
Store and
purchase
department

Send Marine
cover note to
Send documents
ADP & Import to SBC and
section and Store collect marine
& purchase cover note
department

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NON-AVIATION INSURANCE
Marine Insurance (2nd Step)
Received
documents from
Store and
purchase
department

Send Money
receipt, Marine Send
policy & Challan documents to
to Store and SBC and collect
purchase Premium Bill
department

Make payment
process file for
to SBC for
payment of
Money receipt,
management
Marine policy &
approval
Challan

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 Marine Insurance Procedures
➢ Collection of Marine Cover Note from Sadharan Bima Corporation (SBC) for
opening letter of credit (L.C.) for importing goods as per requirement of foreign
purchase section, Procurement and Logistic Support Directorate and handed
over accordingly within 5-7 working days.
➢ As per requirement of Foreign purchase section for clearing of the imported
goods provide Money Receipt, Challan & Marine Insurance policy within 8-10
working days.
➢ Send documents to SBC and collect Premium Bill.
➢ Check the Marine Insurance premium bills process file in E-Nothi and collect
management approval to making payment to SBC for provided Marine Cover
Note at the opening of letter of credit (L.C.).
➢ Last year from 1st July 2019 to 30 June 2020 total amount of paid premium is
BDT 56,17,373.00 and 1st July 2020 to 30th June, 2021 is BDT. 33,01,322.00
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 Motor Transport Insurance

Renewal

Motor
Transport

Claim
settlement Payment

63
 Motor Transport Insurance
Renewal& Payment
➢ All Motor Transports (MT) of Biman are under the Insurance coverage. Last year from 1st
July 2019 to 30 June 2020 (2019-2020) total 186 Motor Transports (MT) was under
Insurance coverage and for the year 1st July 2020 to 30th April 2021 total number of vehicle
insured is 171.
➢ As per advice of Motor Transports (MT) department, 15 days before expiry of Motor
Transport (MT) Insurance period, Insurance Premium bill is collected from Sadharan Bima
Corporation (SBC).
➢ After payment Money Receipt and, Vehicle wise insurance Certificate and policy is
collected from SBC then handed over the Certificate to Motor Transports Department and
policy is kept in Insurance Section within 7-8 working days.
➢ Last year from 1st July 2019 to 30 June 2020 Biman paid BDT 83,15,048.00 and for 1st
July 2019 to 30 June 2020 amount of paid premium is BDT. 50,13,284.00
From January 2021 a new comprehensive policy package is imposed by IDRA.

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 Motor Transport Insurance
Claim Settlement
➢ After getting accident information by letter from Motor Transports (MT)
department, Insurance Section informs to SBC for taking necessary action.
➢ After getting information from Biman, SBC appoints surveyor to survey
actual situation.
➢ Providing related all documents and make continuous correspondence with
SBC. On the basis of survey report and documents SBC & Biman settle the
claim.
➢ Motor Transports (MT) department needs to repair the damaged vehicle,
Insurance Section corresponds with SBC and collects work order and
provides Motor Transports (MT) department.

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 Fire & Cyclone Insurance

Renewal

Fire &
Cyclone
Insurance

Claim
settlement Payment

66
 Fire & Cyclone Insurance

➢ Insurance Section maintains Fire & cyclone insurance policy with SBC for
Biman’s various establishments & locations.
➢ Before expiry of the policy period, insurance premium bill is collected from
SBC. After management approval arrange to make payment and collect
money receipt and insurance policy from SBC.
➢ Total amount of Paid premium for 2019-2020 is BDT. 54,53,816.00 and
total amount of paid premium for 2020-2021(upto 30th April) is
BDT.42,66,860.00

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 Cash In Safe & Cash in Transit

Renewal

Cash In
Safe & Cash
in Transit
Insurance
Claim
Payment
settlement

Total amount of Paid premium for the year 2019-2020 is BDT. 2,22,324.00 and for the
year 2020-2021(up to 30th April,2021) is BDT. 1,62,301.00

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Thank you

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