Industry says claims running into hundreds of millions of dollars will have to be paid
The latest in the series of plane accidents was the UPS Cargo plane crash in Dubai last week which followed a Air Blue plane crash in Islamabad, Pakistan and an Air India Express flight disaster in Mangalore, India.
More than 300 passengers died in the two passenger plane crashes, putting pressure on aviation insurance and reinsurance companies, which covered the planes.
Market leader Lloyds or other aviation insurers contacted by Emirates 24|7 did not reveal how much the premium has gone up.
An official of Green Shield Insurance Brokers, a Dubai-based firm arranging aviation insurance said: “The consequential cost of an air crash is huge and the aviation insurance premiums have been going up.
Insurance companies or reinsurance firms will have to pay for the cost of the plane, the consequential costs, compensation to the victims and their families, revenue losses etc.”
However, industry officials were reluctant to give out figures.
The official, who did not wish to be named, said that not many insurance firms now cover aviation insurance.
After the September 11, 2001, insurance companies had jacked up premiums for aviation risk. The risks are normally re-insured in Europe or USA.
While UPS officials have not revealed details of the plane insurance, Lufthansa Cargo said its cargo plane that crashed in Riyadh two months ago was completely damaged.
“The plane broke into two and it is total loss. We could not repair it,” said Michael Goentgens, Head of Public Relations, International Communication, Lufthansa Cargo. The company did not reveal details of the financial loss from the plane crash.
The Lufthansa plane had taken off from Sharjah and crashed while landing at Riyadh.
The UPS plane, Air India Express plane and Air Blue plane are all total losses, which will mean several hundred millions of dollar claims on the insurance companies.
Reliance General, an Indian private insurer and other insurance consortium members HDFC Ergo, Iffco Tokio and Bajaj Allianz got a major hit of $85 million from the Mangalore Air India Express crash.
Bermuda-based Catlin Group Ltd is the lead insurer of the Air Blue jet that crashed in Pakistan, killing all 152 people aboard. The company did not reveal what percentage of the risk it covers.
It is reported that insurance estimates the hull value of the Airbus at $35 million.
The hull value includes instruments, radios, autopilots, wings, engines, and other equipment attached to or carried on the plane as described in the policy.
Compensation is also due to the victim’s families (152).
Aviation insurance market has been going through difficult times as airline profitability has been hit by high fuel and operational costs.
“We have stopped our airline insurance business in the Middle East. The sector has been doing very poorly and now it is all done directly from London. The aviation insurance premium will further go up due to six air crashes in the recent past.
These are all underwritten in the London market,” said a Dubai-based broker who used to handle aviation insurance.
In London, Lloyds, the global insurance market leader, has sold off Lloyds Aviation, the second largest of its kind in the London market with 30 per cent of business volumes for £2.6 million. As part of the restructuring exercise, Charles Taylor Group PLC (CTG) has acquired the business of Lloyd’s Aviation.
Lloyd’s Aviation was formed as Lloyd’s Aviation Department in January 1960 to provide aviation loss adjusting and surveying services to the international insurance market.
The group’s Middle East director did not reveal details of the insurance claims from the plane accidents. The head office too did not respond to Emirates 24|7 written queries on the topic.
In the case of Air India Express crash, the claim came from both hull and liability cover taken by the airline. Insurers and re insurers will see a claim of $90 million to $100 million.
Payout towards liability depends on the profile of the passengers, industry sources said it could be of the order of $40 million.