India’s national carrier Air India has seen its insurance renewal costs almost double to around $28 million for the year 2018/19 following the recent Ethiopian Airlines crash, according to reports from The Indian Express.
The publication said that a host of adverse factors in combination with the crash, which is expected to become a major loss event for the re/insurance industry, could signal an end to discounts in the aviation segment.
Air India is currently concluding the renewal in the London market for its fleet of 180 aircraft, with a sum assured of $12 billion. The airline’s insurance renewal also includes $30 million of passenger liability cover.
The account is purely reinsurance driven and almost 95% of the cover is reinsured in the London market. New India Assurance is the lead insurer of the Air India deal, while reinsurance deal is led by AIG, The Indian Express reported.
“The aviation insurance market has been hardening for the last one year with Ethiopian crash and the Pulwama terrorist action putting extra pressures on the markets at the time of the Air India’s premium pricing,” sources in the London market told the publication.
Sources also confirmed that Indian reinsurer GIC Re has a 3% exposure in the Ethiopian Airlines insurance cover and would soon be settling the claims for the incident, which resulted in the deaths of all 157 passengers earlier this month.
Chubb and Willis Towers Watson (WTW) have been named as the lead insurer and broker for Ethiopian Airlines, but Boeing insurers Global Aerospace and Marsh could also face large claims if the U.S aircraft manufacturer is found to be at fault.
Reinsurers Swiss Re, Hannover Re and Munich Re have also said that they are exposed to Ethiopian Airlines/Boeing crash, with loss estimates ranging from around €10 million for Hannover Re to €120 million for Munich Re.
According to WTW, while there is still plenty of available capacity in aviation insurance, market withdrawals and merger activity among insurers are putting pressure on total available capacity, The Indian Express said.
Accounts with growth and favourable loss history can expect rates to remain generally flat, while accounts with low growth and unfavourable loss history should expect larger increases, WTW said, noting that losses in the aviation insurance market in 2018 have already surpassed 2017 levels in terms of frequency and severity.