The AirAsia flight, which was en route to Singapore from Surabaya, Indonesia, had 162 people aboard, and Allianz confirmed Monday that it was the lead reinsurer for AirAsia. In addition, Allianz was lead reinsurer for Malaysia Airlines, which experienced two disasters this year: the disappearance of Flight 370 in March and the crash of Flight 17 into territory controlled by Ukrainian rebels in July.
Including the latest disaster, industry experts estimate that aviation insurance companies would have to pay out about $1.8 billion for airline claims this year, with perhaps one-third of that from just the two Malaysia Airlines disasters. Because of the nature of risk-sharing in insurance, however, no single company is likely to be on the hook enough to endanger its financial strength.
Because the payout for a major air crash would prove overwhelming to a single insurance company, the risks are typically spread among a primary insurer and a second tier of financial backers known as reinsurers, which then form a consortium to distribute the risk among themselves. The lead reinsurer takes the largest risk, with the losses divided in accordance with each members stake in the consortium. The group can include 20 or more members.
Allianzs global corporate and specialty unit, one of the worlds biggest reinsurers for airlines, previously said it was lead reinsurer for Malaysia Airlines. Heidi Polke-Markmann, an Allianz spokeswoman, said Monday that Allianz was also the lead AirAsia reinsurer.
The disclosure by Allianz came as the search for the plane flown by the Indonesian affiliate of Malaysia-based AirAsia continued for a second day before being called off as darkness fell.
Ms. Polke-Markmann said it was too early, with the regional authorities still searching for the aircraft, to discuss the facts of the AirAsia case. Allianz does not disclose the details of its potential liability nor other confidential information regarding its reinsurance activities, she said.
She referred to a company statement that our thoughts and prayers are with all those affected by this missing flight, adding: We stand by to support our client as fully and quickly as possible, working in conjunction with the insurance broker and our co-reinsurers.
JLT Group, the London insurance broker, confirmed that it had acted for AirAsia, and that it was providing every assistance as is appropriate in these distressing circumstances. It declined to comment further.
This has not been a particularly good year for air safety. The Aviation Safety Network, a private organization that tracks accidents and safety issues, said that 526 lives had been lost this year in accidents involving 19 commercial airliners carrying at least 14 passengers. That figure, including the AirAsia flight, was almost double the 2013 figure of 265.
Still, the long-term trend has been one of significantly improving safety, according to a report Allianz released this month.
There are currently just two passenger deaths per 100 million passengers on commercial flights, a vast reduction from the 133 deaths per 100 million in the 1962-71 period, Allianz said. Today, it is estimated there is more chance of being killed by lightning (1 in 10.5 million) than dying in a plane crash in the U.S. and Europe (1 in 29 million), Allianz said in a release connected with the report.
When aviation claims are made, though, they are increasingly costly, according to the report, driven by factors including the expense of liability-based litigation and the new high-tech materials used to build planes.
Paul Hayes, safety and insurance director at Ascend, an aviation consulting firm in London, said that while it was early days, the assumption was that the AirAsia crash had been an accident. That means the aviation reinsurance industry would be on the hook for both the aircraft and the indemnities for loss of life, he said.
War-risk insurers, operating mainly in the Lloyds marine insurance market, had been responsible for half the cost of the Malaysia Airlines Flight 370 aircraft, or hull, and for the full aircraft in the case of Flight 17, which is presumed to have been shot down. In both cases, the aviation all-risk insurers were on the hook for the liabilities. An all-risk policy covers most crash-related expenses, including what is usually the biggest: paying for settlements with passengers next of kin.
But the losses of the few are borne by the many, Mr. Hayes said, noting that the risk would have been spread among a number of companies. No one insurer will take too big of a hit.
The broader implications for the insurance market would appear to be minimal, Mr. Hayes added, as the losses were well within what companies were able to handle and competition for customers is holding down premiums.
Of course, insurance payments are only part of a more complex story of how carriers respond to air disasters. AirAsia is one of Asias biggest and fastest-growing budget carriers, and is a relatively strong player with, until now, an unblemished record. It may weather the current crisis without much trouble.
Malaysia Airlines, in contrast, said in August that it would accept a government bailout of nearly $2 billion and would cut thousands of jobs after its two catastrophes. But both Malaysia Airlines and its parent company, Malaysia Airline System, were struggling with growing losses and rising debt levels well before the airplanes were lost.
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