KUALA LUMPUR, Sept 26 ― Insurers will be overwhelmed this year by aviation claims worth a staggering over US$600 million (RM1.96 billion) following the two Malaysia Airlines (MAS) air tragedies, The Independent reported today.
The UK-based news site said the twin disasters of MH370 and MH17, along with the attacks on Libya’s Tripoli airport last month, have contributed to the massive spike in claims, which could prove challenging for the insurance industry.
Lloyd’s of London’s chief executive Inga Beale, who joined the world’s largest insurance market in January, sounded a warning yesterday, after observing that the aviation sector had suffered an “unusually high incidence” of claims of late.
One resulting outcome, the report said citing industry experts, is that the cost of insuring aircraft will likely rise in the future.
“The global aviation ‘hull war’ market (cover for the possibility of war-related damage) accounts for around US$65 million (RM212 million) of premiums per annum; yet already in 2014, claims could exceed US$600 million (RM1.96 billion) for the insurance industry,” Beale was quoted saying.
“In a period when premium rates have generally fallen, this is a reminder of why pricing must reflect the underlying risks which are being written,” he added.
Malaysian flag carrier MAS has lost two jumbo jets with 537 people aboard this year to air tragedies.
On July 17, a Boeing 777 aircraft carrying 298 people crashed after it was shot down by what is believed to be a surface-to-air missile fired by rebels controlling the townships of conflict-ridden eastern Ukraine.
Nearly five months prior to the downing of MH17, Flight MH370 flying from Kuala Lumpur to Beijing mysteriously disappeared off radar screens in the pre-dawn hours of March 8.
A long drawn-out and expansive search for the 239 passengers aboard the ill-fated jetliner has still failed to turn up clues.
Under an international aviation treaty, the next-of-kin of the passengers are allowed to seek up to US$183,000 (RM596,946) each without proving any fault on MAS.
According to the Montreal Convention, the airline can be held liable for the crash even if the investigators rule out pilot error or mechanical issues.
Meanwhile in Libya, 11 commercial jetliners have been reported missing following arson attacks, following a terrorist incursion on Tripoli’s main airport last month.
But despite the sudden escalation in airline disaster costs, The Independent reported that Lloyd's still posted a leap in profits following fewer massive natural disasters.
According to Lloyd’s total claims under the natural disasters segment is down by 12 per cent, as such pre-tax profit rose 21 per cent to £1.67 billion (RM8.88 billion) in the first six month of the 2014.
