Monday, May 06, 2019

Series of crashes to push insurance premium, renewal costs for airlines

Mumbai/New Delhi: Four major aircraft accidents across the world in the last seven months have sent wake turbulence towards Indian aviation companies, which face hefty hikes in insurance renewal costs for the current year.

The recent crashes involving two Boeing 737 MAX aircraft operated by Lion Air and Ethiopian Airlines, followed by a water landing of a Miami International Airlines-operated Boeing 737 and crash landing of a Sukhoi SuperJet 100 flown by Aeroflot are set to push insurance renewal costs up between 10-100 per cent.

Sources in the insurance sector pointed out that the aviation insurance market has been hardening for the last one year and the recent accidents will further push up the premium, with experts saying insurance costs could double in some cases in the next few months.

India’s national carrier Air India’s insurance renewal cost recently almost doubled to around $28 million this year, as a host of adverse factors put an end to the days of discounts in the segment.

Global aviation insurance market has been hit by underwriting losses during the last four or five years.
In the last sixteen months, the aviation industry has seen at least 12 major accidents resulting in loss of hull, meaning damage to the aircraft beyond repair. These include the Boeing 737 crash in May last year operated by Cuba’s national carrier Cubana, resulting in the death of 112 people.

In February this year, a Boeing 767 cargo plane operated by Atlas Air for e-commerce giant Amazon crashed killing all three on board.

“Besides, the current grounding of Boeing 737 MAX due to the software glitches that led to two crashes has complicated the situation in the international aviation reinsurance market. While re-insurers led by AIG have been trying mobilise global premiums of over $1.8 billion to make up losses, they have been hardly able to garner $1 billion which is not taking care of losses.

“So all the airlines which have claims have been saddled with 50-100 per cent rise in premium, while the airlines which do not have claims are facing 10- 20 per cent hike. The situation is not going to be calm down soon,” said a source in the London insurance market.
06/05/19 George Mathew/Pranav Mukul/Indian Express