Aviation insurance market faces US$200Million loss on Ethiopian Airline 777-200F fire

A fire on an Ethiopian Airlines cargo plane in Shanghai last week could cost the aviation insurance market up to US$200mn, something which would make it the most expensive hull loss in the market’s history, industry publication Insurance Insider understands.

The Boeing B777-200F caught fire while loading cargo at Pudong Shanghai airport on 22 July. The aircraft was on a scheduled cargo service from Shanghai to Sao Paulo-Santiago via Addis Ababa.

No individuals were injured in the fire.

The sizeable loss to airline insurers comes as the market is grappling with a significant drop in premium income as a result of the COVID-19 pandemic and the subsequent grounding of fleets globally.

For insurers on the Ethiopian Airlines account, the loss this week follows the sizable claims that emanated from the fatal crash of flight ET302 in March 2019.

The crash on 10 March subsequently led to the decision to ground the entire fleet of the Boeing 737 Max 8 aircraft worldwide.

As always Aerosure will continue to keep our clients fully informed of further updates, however should you have any queries in the meantime please do not hesitate to contact us.

Antares exits Property and Aviation insurance markets

In news released yesterday, Antares Underwriting has confirmed they are exiting the Property and Aviation markets following a strategic review led by their parent QIC Global – further details are outlined in the attached media-link.

As always Aerosure will continue to keep our clients fully informed of further updates and solutions where required, however should you have any immediate queries please do not hesitate to contact us.

Insurance Insider – Anatres exits market

Aviation war insurance market witnessing demand uptick over COVID-19 groundings

In their latest market update, Industry publication The Insurer reports Aviation hull war underwriters are facing a surge in demand for cover as airlines look to increase limits in place for grounded fleets.

The publication understands that carriers that write the niche sub-class of aviation insurance are seeing more submissions for excess aggregate cover as well as demand for increased limits.

The uptick is being driven by grounded fleets as a result of the global pandemic, which make for easier targets when located in close proximity at air bases or airports.

The publication reports, the number of grounded aircraft makes for “eye-watering aggregate exposures”, according to industry sources.  The following table summarises estimated values of aircraft stored at the world’s largest airports as at the start of April 2020.

Unlike the airline insurance market – where policies are often adjustable on expiry with no minimum premium payments in place allowing airlines to extend coverage when fleets are upsized, additional routes are added or on passenger numbers – hull war risks are typically not adjusted.

So while airline insurance carriers are expecting to write down their portfolios by 50 – 60 percent of their annual premium income this year, as this publication has previously reported, hull war underwriters are expected to buck this trend.

Capacity tipping point

The global pandemic and its associated increased exposures are impacting the aviation war market at a time when it was already looking to secure more rate from buyers after two significant losses at the start of the year.

The aviation war sector faced two incidents in January: the Manda Bay air base attack in Kenya and the loss of Ukraine International Airlines Flight 752.

In the first loss, an attack on Kenya’s Manda air base left one US service member and two contractors dead, with six aircraft and helicopters either damaged or destroyed.

The second and far larger incident occurred when Iranian forces mistakenly shot down a Ukrainian passenger aircraft after mistaking it for a US missile.

As first reported by this publication, the downing of the Ukrainian International Airlines (UIA)  flight hull war policy was led by Tokio Marine Kiln, with the hull of the Boeing 737-800 airliner insured for around US$53mn.

The policy is also believed to feature a US$5mn in total-loss-only cover and US$2.5mn in incurred costs of working.

Both incidents happened very early in the year and are thought to have wiped a large chunk of the circa $100mn annual premium for the class of business, with sources suggesting to this publication that the Manda airbase and UIA flight expected to result in a loss for the aviation war market to the tune of some US$70mn.

With insurance carriers already pushing for rate as a result of these losses, the COVID-19 crisis and subsequent impact on the accumulation of assets in the airline industry is set to drive rates higher.