Aviation


Spare a thought for the tens of thousands of passengers (including I.I.I. president Dr. Robert Hartwig) stranded at airports across Europe as the continued eruption of a volcano beneath Iceland’s Eyjafjallajokull glacier grounded thousands of flights for the second consecutive day. According to an Associated Press report, Eurocontrol, the European air traffic agency, said half a dozen European nations have closed their airspaces and 60 percent of European flights would not operate with delays continuing into Saturday. Only 11,000 of the 28,000 flights on an average day were expected to take place Friday in European airspace, while about 100 trans-Atlantic flights arrived of the 300 typically expected. As for insurance implications, an online article at National Underwriter quotes Gordon Woo at Risk Management Solutions saying that payouts from Iceland’s national natural catastrophe fund could follow if there is property damage. Business interruption for the aviation industry may also be triggered, […]

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Investigations continue into the plane crash that killed Polish president Lech Kaczynski and some of the country’s top political and military personnel on Saturday. According to reports, the Tupolev 154 aircraft en route from Warsaw to Smolensk crashed as it tried to land in foggy conditions about 1.5 km from Smolensk airport in Western Russia. All 97 people on board were killed, including Poland’s deputy foreign minister, a dozen members of Parliament, the chiefs of the army and the navy and its Central Bank governor. An April 12 New York Times article observes that investigators examining the crash appear to be focusing on why the pilot did not heed instructions from air traffic controllers to give up trying to land in bad weather. The NYT reports: “Their inquiry may lead to an even more delicate question: whether the pilot had felt under pressure to land to make sure that the Polish […]

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Hull and liability premium prices in the airline insurance market are likely to continue to rise in 2010, but the rate of increase could slow as a result of the high level of capacity that is still available, according to Aon’s Airline Insurance Market Outlook 2010. Aon says there are a number of reasons why the price rises are not likely to continue at the same rate in 2010. Firstly, while average lead hull and liability premium in the airline insurance market rose by 20 percent during 2009, taking total lead hull and liability to $1.9 billion, average annual claims over 10 years came to $1.8 billion. This means the airline insurance market’s current level is now enough to comfortably cover claims in an ordinary year, according Aon. Still as 2009 has proved, there is always the potential that there will be an extraordinary level of claims in a given […]

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In a recent post we discussed how aviation losses outweighed premiums in 2009, despite a relatively safe year for the airline industry last year. With the crash of Ethiopian Airlines flight 409 early this morning into the Mediterranean Sea off Lebanon’s south coast aviation insurers appear to have been hit with their first major loss of 2010. The Boeing 737-800, en route to Addis Ababa, crashed shortly after take-off from Beirut after losing contact with airport control amid stormy weather. According to media reports, a total of 90 passengers and crew were on board, including Marla Pietton, wife of the French ambassador to Lebanon. As of yet, no survivors have been found. While it is too soon to speculate on the cause of the crash, several reports quote Lebanese President Michel Suleiman saying a terrorist attack is unlikely. “Sabotage is ruled out as of now,” he said. Others report on the stormy […]

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Despite a relatively safe year for the airline industry, aviation insurers paid out an estimated $2.3 billion in total losses in 2009 – making it the second most costly year on record. According to Aon’s January 2010 Airline Insurance Market News, the total lead hull and liability premium for 2009 was around $1.9 billion, up from $1.6 billion in 2008, but still far short of the $2.3 billion in total claims. This means 2009 is the third consecutive loss making year for aviation underwriters. However, Aon cautions readers to look beneath the headlines for the real story. With average lead hull and liability price increases of around 20 percent during 2009, the airline book of business began to look attractive again despite the high level of claims, it notes. This means that prices are likely to continue to rise in 2010, but, unless there is a major loss, the increases should […]

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After the attempted Christmas Day bombing and resulting ramp up in airport security it was with some apprehension that I headed to London’s Heathrow airport for my return flight to the U.S. this past weekend. New airport security rules were in effect for flights going to the U.S. and extra screening of passengers and hand baggage at the gate could be expected. The manual search was painstaking as every one of the more than 250 passengers was patted down and had the contents of their bags and footwear reviewed. As our flight finally departed some two hours later than its scheduled take off, I had to question the effectiveness of this risk management process. Wouldn’t the use of advanced equipment such as a body scanner or extra questioning of passengers be more relevant? There were some changes on board the aircraft too. The use of blankets and pillows by passengers during take off and […]

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By now it’s old news that pilots of a Northwest flight that overshot its Minneapolis destination by 150 miles a week ago were looking at their laptops. Yesterday the Federal Aviation Administration (FAA) said it had revoked the licenses of the pilots. They have 10 days to appeal the decision to the National Transportation Safety Board (NTSB). According to a Wall Street Journal article, federal safety rules prohibit laptops in cockpits below 10,000 feet, but allow them during cruise. However, it cited a statement from Delta (now merged with Northwest) that the airline expressly forbids pilots from using laptops at any time or engaging in personal activity that could distract from flight duties. Just a few weeks ago the U.S. Department of Transport held a Distracted Driving summit which highlighted the growing dangers of driving while distracted by texting or cellphone use. The Northwest incident underscores the point that whether […]

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The high value of losses and fatalities in the aviation sector has driven the airline insurance market into a far harder position so far this year, according to Aon’s Airline Insurance Market Indicators 2009/10 report. Lead hull and liability premium rose on average by nearly 20 percent between January and July 2009, and there is little sign that the position will improve during the final quarter when the majority of airline premium is placed. Despite the market hardening, as a result of the high level of claims, 2009 is likely to be the third consecutive year with little or no profit for underwriters. This means there will be significant pressure to increase prices further, Aon notes. It estimates that the cost of premium is likely to rise by at least a fifth for the rest of the year and into 2010. From a claims point of view 2009 is set to be […]

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Airline insurance programs saw an average premium increase of more than 20 percent in July bringing the average increase for the year so far to 17 percent, according to Aon’s August 2009 Airline Insurance Market News. That said, Aon notes that the average is somewhat inflated by the renewal of a U.S. program that had a fatal loss earlier in the year. Without that, the average increase in lead hull and liability premium would only be 14 percent so far this year. Irrespective of the specifics, the current conditions are clearly a significant turnaround compared to 2006 and 2007, when prices in the airline insurance markets declined by more than 10 percent each year. Despite only one major loss since June, 2009 still looks set to be very expensive from a claims point of view, according to Aon. Overall losses (including minor losses) have cost aviation insurers $1.66 billion so […]

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Total claims for aviation insurers are likely to be significantly higher than the average by year-end, even if there are no further major accidents, according to Aon’s July 2009 Airline Insurance Market News. With just over half of 2009 gone, claims including an estimate for minor losses are already around 11 percent higher than the average for a full year. Overall losses (including minor losses) have cost aviation insurers $1.59 billion so far in 2009, compared to $715 million in 2008. Aon projects that total claims for the year could exceed $2.2 billion, nearly 60 percent higher than the long term average of $1.4 billion. With the Air France and Yemeni losses, June looks set to be the most expensive month in the aviation insurance market since September 2001. “In an already hardening market, this means price rises are likely to be universal for the rest of 2009,” Aon notes. […]

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