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AIRLINE INSURED FOR JET CRASH

Posted On: Oct. 19, 1997 12:00 AM CST

LONDON-Aviation underwriters have set up a $10 million liability reserve for the crash last week in Uruguay of an Austral Airlines DC-9 that killed all 74 people on board.

Austral Airlines, owned by Aerolineas Argentinas, places its hull and liability coverage in London through Willis Corroon Aerospace, part of Willis Corroon Group P.L.C. British Aviation Insurance Group leads the coverage, which renews Nov. 1. The jet, built in 1969, is insured for $3 million.

Willis Corroon would not comment on the loss or how it would affect the upcoming renewal.

The Austral flight was en route from the Argentine city of Posada to Buenos Aires when it plummeted while in mid-air in a storm near Nuevo Berlin, about 190 miles north of Uruguay's capital of Montevideo and 280 miles north of Buenos Aires. News reports say the plane disintegrated on impact.

News reports also say the pilot told the Buenos Aires airport that he was changing course to avoid a heavy rain and hailstorm.

The loss Oct. 10 came exactly a week after a major fire in a hangar at Brussels' Zaventem airport, used by Sabena airlines. The fire could cost insurers more than $50 million, underwriters say (see story, page 10).

Airlines are in the midst of their heaviest insurance renewal season, which occurs in the fourth quarter.

Willis Corroon Aerospace estimates hull and liability rate reductions are similar during October renewals to September, when hull rates on average dropped 18% from last year and liability rates fell 11%. A London aviation underwriter thinks hull and liability rates have dropped as much as 40% for major airlines with good loss records that renew this month.

Meanwhile, Willis Corroon Aerospace says aviation hull war risk is plunging worldwide. This year it is unlikely that hull war risk premium worldwide will be much above $60 million, down from $110 million last year.

Aviation product liability premium also has halved between 1986 and 1996, the broker said in its recent aerospace newsletter.