National Assembly Passes Bill Raising Airlines’ Liability for Deaths, Injuries and Lost Baggage

Kathmandu — The government has moved to increase airlines’ liability for accidents, passenger deaths and injuries, lost baggage, and damage to third-party property. With the National Assembly unanimously endorsing the proposed Internal Air Service Liability Bill, airlines’ insurance coverage and risk management are set to become increasingly important.

Minister for Culture, Tourism and Civil Aviation Khadgaraj Poudel registered the bill in the National Assembly on August 14. It proposes that airlines must safely transport passengers to their destinations and provide prescribed facilities and compensation in cases of flight cancellation, suspension or delay.

Under the proposed legislation, an airline would be required to pay up to USD 100,000 to the immediate heirs of a passenger or third party who dies in an accident. If a passenger or third party is injured or suffers permanent disability, the airline would have to cover treatment costs and pay compensation of up to USD 100,000 for the injury or disability.

Such large potential liabilities are expected to increase the importance of aviation liability insurance. Rather than airlines bearing the entire burden from their own funds, insurance can transfer much of the risk arising from accidents, passenger deaths and injuries, and third-party property damage.

The bill also proposes compensation of USD 20 per kilogram for baggage that is lost, destroyed or damaged while under an airline’s responsibility, up to a maximum of USD 500. Airlines would also be liable for damage to passengers’ hand baggage caused by their own negligence.

These provisions could increase the importance of insurance covering baggage and passenger liabilities, with such coverage potentially becoming a key risk-transfer mechanism as airlines face larger compensation claims following accidents or third-party property damage.

Airlines would also be responsible for compensating third parties for loss or damage to property caused by an aircraft accident or other incident, requiring them to manage not only passenger-related liabilities but also potentially significant third-party risks.

The bill proposes a 90-day deadline for filing claims related to death, injury, disability or third-party property damage, while claims involving flight cancellation or suspension, lost or damaged baggage, and lost, damaged or delayed cargo would have to be filed within 30 days. Airlines would be required to decide on claims and notify claimants within 60 days of receiving them.

Following the National Assembly’s approval, lawmakers now have 72 hours to submit amendment proposals. If enacted, the legislation would not only increase airlines’ compensation obligations but also raise the need for adequate insurance coverage, risk assessment and liability management across the aviation sector.

For the insurance industry, the proposed framework could create opportunities for growth in aviation insurance, passenger liability insurance and third-party liability coverage. As airlines’ legal liabilities become clearer, insurers may also need to strengthen their assessment of aviation risks, premium pricing and reinsurance arrangements.