Higher Air Accident Compensation Raises Questions Over Insurance Costs and Premiums

Kathmandu — A proposal to increase compensation for passengers killed in air accidents has sparked discussion over the resulting insurance costs and their potential impact on premiums.

The Bill on the Liability of Domestic Airlines, 2026, currently under discussion at the National Assembly’s Legislative Management Committee, proposes compensation equivalent to US$100,000 for the immediate family or legal heirs of passengers or third parties killed in an accident. The bill is currently being discussed in committee.

The existing insurance liability for domestic air accidents is understood to be around US$20,000. If the proposed provision is implemented, the liability would increase fivefold.

The government has argued that the higher insurance liability could increase the insurance premiums paid by airlines and indirectly affect airfares. Minister for Culture, Tourism and Civil Aviation Khadak Raj Paudel has said that raising the insurance liability from US$20,000 to US$100,000 could increase insurance costs and, consequently, put some upward pressure on airfares.

Meanwhile, Nepali Congress lawmaker Khamm Bahadur Khati has suggested increasing the compensation limit to US$150,000. He has also proposed reviewing the compensation amount every five years so that it can be adjusted to changing economic conditions.

The bill also proposes that, if compensation is not immediately available following an accident, at least NPR 500,000 should be provided for funeral expenses when the body is handed over to the family.

As the committee continues its deliberations, the impact of higher compensation liabilities on airlines’ insurance costs and premiums has emerged as an important issue alongside passengers’ financial rights and protection.