Flight MH-17 losses to be absorbed by Lloyd’s market
Much of the loss stemming from the Malaysia Airlines flight MH-17 crash is to be absorbed by the Lloyd’s market as well as some global re/insurers, according to AM Best.
The rating agency says that it does not expect to take any rating actions in response to the loss, given the diversified nature of business underwritten by the entities involved.
The total insurance loss will comprise physical damage to the aircraft and passenger liability claims.
According to reports, the aircraft is valued at approximately $97 million.
“As an industry leader in the global aviation market, the Lloyd’s market is also likely to be affected by passenger liability claims, as will a number of global reinsurers. Due to the nature of the loss, a complex and lengthy settlement period is anticipated,” says the rating agency.
Allianz SE, through its specialty lines subsidiary, Allianz Global Corporate & Specialty, is the lead reinsurer on aviation hull and liability risks for Malaysia Airlines.
Additionally, Atrium Syndicate 609 has confirmed that it is the leader of the hull war policy for Malaysia Airlines. The syndicate and its co-insurers have agreed to settle the hull war aspect of the loss and collection of funds has been instigated.
AM Best says: “However, the agreement to settle is on the basis that the early assumption regarding the key facts remains correct: i.e., that the plane was shot down and it is the insurers that wrote the airline’s hull war policy, rather than its all risks policy, that are liable.”
The rating agency also adds that three consecutive large losses this year - the disappearance of Malaysia Airlines flight MH-370, hull losses due to fighting at Tripoli airport and the downing of Malaysia Airlines flight MH-17 – should now halt the decline in aviation rates. It is likely that increases will be constrained by the high level of capacity serving the market however.