By CYRIL TUOHY, managing editor of Risk & Insurance®
It's been a brutal few months for aircraft industry hull losses since the first of the year. To wit, according to the Web site AirDisaster.com and other news reports:
On July 15, 2009, a Caspian Airlines three-engine passenger jet crashed shortly after takeoff from Teheran. All 168 passengers and crew are killed. Investigators find the black boxes belonging to the jet and the cause of the crash is under investigation.
On June 30, 2009, a Yemenia Airways Airbus twin-engine jet plunged into the Indian Ocean during a descent, killing 152 passengers and crew. Only a 12-year-old girl survives. The cause of the crash is under investigation.
On June 1, 2009, an Air France Airbus passenger jet disappeared over the Atlantic Ocean off the coast of Brazil. All 228 passengers and crew are killed, and the cause of the crash remains a mystery.
On March 23, 2009, a three-engine cargo jet flipped over on landing at Tokyo's Narita International Airport, killing two crew members. Investigators blame the accident on high winds.
On Feb. 25, 2009, a Turkish Airlines 737 jet crashed into a field a mile short of the runway in Amsterdam, killing 9 out of 135 passengers. The cause of the crash is still under investigation.
On Feb. 12, 2009, a Colgan Air twin-propeller commuter aircraft plunged to the ground killing all 49 passengers and crew, as well a one person on the ground. The cause of the crash: icing on the wings.
On Jan. 11, 2009, a twin-engine Zest Air propeller plane crashed just short of the runway and slid into a concrete wall, injuring 22 passengers and crew. The accident was blamed on wind.
On Jan. 6, 2009, a twin-jet Continental Airlines crashed on takeoff from Denver International Airport and exploded into flames. A total of 38 people are injured, five critically.
In all, 441 people have been killed in crashes involving major commercial and cargo airlines since the beginning of the year.
IMMENSE UNDERWRITING PRESSURES
With hull claims in early June running more than 50 percent above the long-term average and fatalities running 20 percent above the long-term average, the pressure on underwriters to push up prices for aviation insurance for 2010 is going to be immense, according to a June aviation market report by insurance brokerage Aon.
Following the Air France disaster, there was a glimmer of hope that the industry could stave off a price increase--but only if it could end the rest of 2009 with a near-pristine record.
"This suggests that the industry is going to have to have a very impressive safety record for the rest of the year if it is going to hold off further increase from airline insurance markets," according to the Aon report, which was published before the Yemenia Airways and Caspian Airlines disasters.
The last two years, 2007 and 2008, have also been unprofitable for airline hull underwriters, and prices this year were already on the rise. In addition, claims stemming from the Air France disaster, with a hull value of $99 million, are likely to be high.
Preliminary findings in the Air France accident point to problems with pressure sensors on the Airbus A-330 aircraft, which, if confirmed, will put upward pressure on pricing. Press reports warning of a drop in airline safety doesn't help either.
MORE THAN JUST CRASHES
The dynamics of airline insurance pricing depend on more than a laundry list of air crashes, of course, and the market will have to wait until the November-December hull renewal season, when brokers place about 60 percent of the total annual lead hull and liability coverage.
The likely increase could be tempered by the fact that commercial aviation is still very safe, and there's "latent capacity in the airline insurance market" according to the Aon report.
In addition, the real cause of the Air France crash will not be known for weeks or months, as Navy searchers continue looking for the plane's back boxes resting 20,000 feet below the surface.
Aon's June report shows a total of 45 airline hull contract renewals from Jan. 1 through early June with expiring premium at $186.77 million and renewal premiums at $200.61, an increase of 7 percent.
July 16, 2009
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