Aviation insurance claims have risen after string of disasters
Sept. 26, 2014, London, U.K. - The disappearance of Malaysia Airlines flight MH370 and other losses this year have increased aviation insurance claims to 10 times the cost of annual premiums, Lloyd’s of London said.
Global insurance premiums to protect aircraft and other
aviation assets are about $65m (£40m) a year but claims could already be
more than $600m, the world’s biggest insurance market said.
“The most notable claims have arisen from the unusually high incidence of aviation losses, which have been sudden and tragic,” Lloyd’s chairman, John Nelson, and chief executive, Inga Beale, said in a statement.
A Malaysia Airlines Boeing 777-200 disappeared in March with
239 people on board and has still not been found. Lloyd’s insurers have
already paid out for the loss of the plane but there have been further
disasters in the past six months.
Lloyd’s said the wider market for catastrophes was benign in
the first half of this year, helping profits for the six months to June
increase to £1.67bn from £1.38bn a year earlier. But it said market
conditions were getting more difficult.
Aviation disasters in the second half of the year included the shooting down of another Malaysia Airlines plane, flight MH17, above eastern Ukraine in July, attacks on Tripoli international airport, the loss of an Air Algérie flight to Mali and the crash of a TransAsia Airways plane in Taiwan.
“In a period when premium rates have generally fallen, most
notably in the reinsurance space, this is a reminder of why pricing must
reflect the underlying risks which are being written,” Nelson and Beale
They said insurance prices were under pressure because, with
interest rates low, investors were putting extra capital into the
industry. Lloyd’s insurers have generally resisted the temptation to
write insurance contracts too cheaply, they added.
“While the Lloyd’s market has again benefited from a lower
level of major claims activity, this intensifies the competitive
pressures and the outlook of a continued weakening pricing environment
remains,” Lloyd’s said.
Conflicts in Russia, eastern Ukraine, Libya and the Middle
East have not triggered big losses so far at Lloyd’s but business from
those regions has decreased. Companies are increasingly insuring
themselves against cyber-attacks and are asking for wider coverage and
Lloyd’s said weather incidents including cold weather in the
US and Japan, windstorm Ela and flooding in the UK were unlikely to
cause big losses for its insurers.