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Sarah Veysey

Claims from missing Malaysia Airlines flight likely limited: S&P

March 31, 2014 - 11:30am

Malaysia Airlines Insurance Claims


Claims arising from the loss of Malaysia Airlines flight 370 likely will be manageable for insurers and reinsurers, according to analysis Monday by Standard & Poor's Corp.

S&P said in a statement that it expected insured losses from the missing jet to be between $250 million and $450 million, depending on the outcome of any court settlements and other factors.

“The losses will be well spread throughout the global aviation insurance and reinsurance markets,” said Dennis Sugrue, a London-based credit analyst at S&P, in a statement.

“The impact on smaller rated Asian insurers and reinsurers that have a share of the potential losses should be manageable because their reinsurance or retrocession protection is likely to keep their net loss relatively low,” he said.

The aggregated loss exposure of life insurance coverage, mostly for the 154 Chinese nationals on board the flight, “appears to be limited,” S&P said.

The loss of the flight is unlikely to trigger any major changes in rates for aviation insurance coverage, S&P noted.

But claims could arise from all-risk aviation coverage, war and political risks coverage, and product liability.

While the tragedy likely will not lead to any hardening in rates for global aviation insurance coverage, there may be a greater impact on the aviation war risk insurance market, S&P said.

This coverage indemnifies the value of the airplane hull in the event of terrorist activity, a hijacking or pilot suicide, among other things, S&P explained.

If the loss of flight 370 is declared a war loss, it would represent one of the largest losses in this area of the market — which is relatively small, with market premium volume of about $100 million a year — since the 2001 terrorist attacks in the United States, S&P noted.

This likely would lead to rate increases for aviation war policies, it said.

 



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