The majority of the loss stemming from the crash of Malaysia Airlines flight MH-17 will be absorbed by the Lloyd’s market as well as some global re/insurers, according to AM Best.
In the briefing, the rating agency said 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 passenger liability claims and physical damage to the aircraft. Passenger liability claims will be covered as part of aviation all risks policies.
Allianz SE, through its specialty lines subsidiary, Allianz Global Corporate & Specialty, is the lead reinsurer on aviation hull and liability risks for Malaysia Airlines.
“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,” said the rating agency.
According to recent reports, the aircraft is valued at approximately $97 million.
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 said: “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 added 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. But increases will be constrained by the high level of capacity serving the market.
Lloyd's, Europe, Malaysia Airlines, AM Best, Allianz Global Corporate & Specialty, Atrium, Asia-Pacific