Revisiting the aviation insurance market
RECENT MAJOR AIR DISASTERS March 8, 2014 Malaysia Airlines Flight MH370 disappears during a flight from Kuala Lumpur to Beijing. No debris is found. July 17, 2014 Malaysia Airlines Flight MH17 crashes in eastern Ukraine; all 298 on board are killed. Pro-Russian rebels deny responsibility.
The shocking crash of TransAsia Flight GE235 is the latest of several aviation losses that have plagued insurers in the past year. IBA takes a look at how the market is responding
July 23, 2014 TransAsia Airways Flight GE222 crashes in typhoon weather during a flight to the island of Penghu. Forty-eight of the 54 people on board are killed.
THE CRASH OF a TransAsia turboprop plane in early February left 38 of its passengers dead and the world stunned as video footage surfaced of the plane clipping the Nanhu Bridge and crashing into the Keelung River in Taipei, Taiwan. But while the incident itself was tragic and shocking, it is not an isolated one – it is the latest in a string of plane tragedies involving Asian airlines. Another TransAsia plane went down in typhoon conditions in July, while AirAsia sustained a loss in December when one of its planes crashed en route from Surabaya, Indonesia to Singapore. Malaysia Airlines Flight MH17 was shot down over eastern Ukraine last July, and
December 28, 2014 AirAsia Flight QZ8501 goes down in bad weather while flying from Indonesia to Singapore. There were 162 passengers and crew on board.
the airline has still not located the plane that went missing over the South Indian Ocean in March 2014. This rash of plane disasters has cast a pall over the commercial aviation insurance market. Carriers are facing annual losses exceeding $2 billion, including liability and hull losses expected to amount to several hundred million dollars. It represents the biggest bill carriers have had to foot since the September 11, 2001 terrorist attacks and dwarfs the roughly $60 to $90 million in income insurers received in 2013. “For a number of years, abundant capacity has placed considerable pressure on pricing, as well as terms and conditions, across all aviation lines,” says Catherine Thomas, direc-
“The risk profile of international aviation has shifted, becoming riskier and justifying a response in terms of underwriting and pricing” Robert Hartwig, Insurance Information Institute
February 4, 2015 TransAsia FlightGE235 clips a bridge and crashes into the Keelung River in Taipei, killing 38 of its 53 passengers.
tor of analytics at A.M. Best. “At the beginning of 2014, rates were significantly below peak levels,” and despite a few losses, the market was still profitable. But now, “losses will considerably outweigh premiums written, and insurers are expected to react with substantial rate increases,” Thomas said.
Rising rates For some international aviation insurers, that process is already in motion. Following the gunning down of Malaysia Airlines MH17, un-
10-11_News Analysis-SUBBED.indd 10
13/03/2015 6:04:01 AM
The magazine for America’s insurance broking and advice community.