Rates may have to rise 20% as number of crashes rise
The Air France crash that killed 228 people may be the most costly airline disaster since 2001, reports Bloomberg.
Families are entitled to at least $150,000 for each of the passengers, and lead insurer Axa is ready to begin negotiations for additional payment, said Patrick de La Morinerie, who oversees aviation at a subsidiary of Paris-based Axa.
The insurer is notifying relatives this week they can receive an initial payment of about $24,000 per victim, an offer mandated by an international treaty on air travellers’ rights.
“It’s going to be an expensive claim,” said Stephen Riley, executive director of Global Aerospace Underwriting Managers, which has 7.5% of the plane’s coverage. “This will be the largest loss to the insurance market arising from an aircraft accident since that loss in late 2001,” when a flight from AMR Corp’s American Airlines crashed in Queens, New York killing 265 people and costing about $600m, he said.
Riley has said his firm is backed by Warren Buffett’s Berkshire Hathaway. AIG has 12.5% of the coverage with its net loss capped at $21m.
Allianz, identified as another company in the pool, had no comment.
Axa may begin to settle claims before a reconstruction of the events is completed and blame apportioned.
Insurance rates may jump this year after fatal crashes and near disasters could produce claims of $1bn, according to Roman Beilhack, head of aviation insurance at Munich Re. “Major fleet insurance is still priced way too low,” he said in an interview. Rates will rise at least 20% this year, on average, Beilhack, said.
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