The tragic demise of Air France Concorde flight AF4590 raises many questions about air safety and the state of the aviation insurance market. Before the Concorde's take-off for New York from Charles De Gaulle airport, Paris, on Tuesday, the jet had an unblemished safety record. This dramatically changed less than a minute later, when one of the supersonic plane's engines burst into flames.

This led to a blaze that left more than 100 passengers and crew dead; another four people died when the plane collided with the two-star Hotelissimo hotel.

As accident investigators sift through the supersonic jet's wreckage, concerns are being raised over the future of the 25-year-old British and French Concorde fleets.

Built as a symbol of Anglo-French détente in the sixties, it is now considered a relic of a bygone era – expensive to run in a time of high fuel prices, Concorde often flies half empty.

British Airways sees no reason why its Concorde fleet should not continue in service until 2015. However, the Air France crash may hasten the luxury jet's retirement.

It may also stand as a potent metaphor for the parlous state of the aviation insurance market, which has been hit by increasing losses and over-capacity.

Although airline fatalities in 1999 fell to their lowest levels in recent years, hull losses that year reached a record high, according to the Aviation Insurance Officers' Association.

There were 512 passenger fatalities last year and losses exceeded premiums by £310m. In 1998, losses outstripped premiums by £550m.

The aviation market therefore appears to be at the rock bottom of its current cycle.

The high-profile Concorde crash is actually the ninth fatal airline accident this year. It is likely to represent a severe loss to insurers considering Concorde's high net worth clientele and its status as one of the most expensive type of aircraft flown. Concorde's insurers say it is too early to calculate the exact size of the loss.

Informal estimates from sources inside the aviation insurance market, however, suggest total claims, including those from the deceased passengers families, the 40-room Hotelissimo hotel and the aircraft's owners, could amount to between £164m and £230m.

Lawyers in Germany are believed to be launching legal action for compensation of £3m for each victim. This final bill could overtake the Swiss Air disaster 18 months ago, which left more than 200 fatalities.

Cover for the Air France fleet, including its seven Concorde jets, was arranged by a French broker.

This risk was placed with AGF Allianz (30%), Axa (20%) and pooling agent Reunion Aerienne, which assumed the role of lead underwriter by taking 50% of the risk. Reunion Aerienne is a consortium of French insurers and comprises CGU France, Groupama, Generali France and Mutuelle du Mans.

A spokesman for the consortium declined to comment on the extent of the claim it potentially faces. However, he disclosed that the risk had been reinsured in a number of world insurance markets including Lloyd's. This reinsurance business was handled by UK broker Heath Lambert Group.

In a joint statement the consortium commented: "The compensation process for the victims of this catastrophe is governed by applicable texts, which rule the Air Carrier's liability in case of an accident (the Warsaw Convention, the European Council Regulation 2027 of October 9, 1997 and the General Conditions of Carriage).

"Accordingly, the Air Carrier shall pay to the passenger's next of kin an advance payment to meet their immediate economic needs on a basis proportional to the hardship suffered. Such advance payment shall not be less than about FF140,000 (£13,134) per passenger, to be deducted from the final amount of compensation.

"Subject to expressed stipulations to the contrary in the European Council Regulation and other applicable laws, the Air Carrier will fully compensate the damages sustained by the victims. The Air Carrier shall also compensate the damages sustained in particular by the occupants and owners of the hotel, that was destroyed in this accident."


Recent fatal airliner events

July 25 2000
Air France Concorde near Paris, France.
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All 100 passengers and nine crew members were killed. Four people on the ground were also killed

July 17 2000
Alliance Air 737-200; Patna, India.
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All six crew members and 45 of the 52 passengers were killed. Five people on the ground were also killed

July 8 2000
Aerocaribe BAe Jetstream 32; Vilahermosa, Mexico.
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Both crew members and all 17 passengers were killed

June 22 2000
Wuhan Airlines Y-7; near Wuhan, China.
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All four crew members and 40 passengers were killed. Seven people on the ground were also killed

May 21 2000
Executive Airlines BAe Jetstream 31; near Wilkes-Barre, Pennsylvania.
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Both crew and all 17 passengers were killed

April 19 2000
Air Philippines 737-200; near Davao, Philippines.
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All 124 passengers and seven crew members were killed

January 31 2000
Alaska Airlines MD83; near Pt Mugu, California.
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All 83 passengers and five crew staff were killed

January 30 2000
Kenya Airways A310-300; near Abidjan, Ivory Coast.
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Ten crew members and at least 160 of the 169 passengers were killed

January 10 2000
Crossair Saab 340; near Zurich, Switzerland.
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Three crew and seven passengers were killed