Magazine Ultimate Jet #74

Insurance claims
In the background of these customary inner workings looms the
development of an unpleasant state of affairs. As countries succumb
in waves to Covid-19, its devastating impact on aviation industries
is mainstream knowledge. If one wonders if this dramatic downturn
adversely affects aviation insurers, the long and the short of it is: yes!
Before the pandemic, aviation insurers were already overdrawn
following years of operating below burning cost pricing. For the year
2018 Partner Re determined that the total gross annual premium
for the entire aviation insurance market (including all airlines,
business and general aviation, airports, products and services and
hull war policies) was US$4,250 billion. More specifically the total
premium received from airlines was US$1,4 billion. In comparison
the worldwide insurance market generated US$ 5 trillion that year.
Nevertheless while aviation insurance has one of the smallest
market capital, high value losses are endemic to the industry. AGCS
analysed over 50,000 claims between 2015 and 2020 and found
the total cost to be US$16.2 billion. The reason is simple, more
sophisticated aircraft and complex engines are increasingly fuelling
high-cost claims.
Meanwhile the B737 Max 8 losses are still developing. The total number
of lives lost in the crashes is 346. The US accident investigation
authority (NTSB) reported several design concerns, which led to
the subsequent grounding of the aircraft and the interruption of
the production line. As an aviation product manufacturer, Boeing is
insured for the losses sustained by Lion Air, Ethiopian Airlines and
their passengers. Grounding coverage also insures Boeing against
loss of use claims from owners of B737 Max 8 pending the repairs or
design modifications allowing the aircraft to fly again. The insurance
limit for Boeing is reportedly US$2 billion, including a sub-limit for
grounding of US$500 million. Therefore the B737 Max 8 losses could
potentially be the highest aviation insurance claim since 9/11.
Ultimate Jet I 61