Willis Re: Ethiopian Airlines crash liabilities could hit reinsurers’ premiums
Insurance claims following the Ethiopian Airlines crash and consequent grounding of Boeing’s 737 Max 8 planes could be as much as $1 billion, according to James Vickers, chairman of Willis Re International.
The crash on the 10 March killed 157 people and was the second crash involving this aircraft model in five months after a Lion Air flight crashed into the sea in Indonesia, killing 189 people.
Liability claims of $1 billion is a large amount for the “very small and very, very specialist” aviation reinsurance market, Vickers told Reuters. Willis Re reportedly said this level of losses, described as possibly the largest non-war aviation reinsurance claim on record, could erode three to four years of aviation reinsurers’ premium in the “global excess of loss” category of reinsurance.
Aircraft manufacturer Boeing recently announced software upgrades to its 737 Max planes. The planes Mcas flight control system is under investigation as a possible cause of the crashes.
The lead insurer for Boeing is Global Aerospace, which is majority owned by Munich Re, with Berkshire Hathaway owning a substantial share. Chubb and Willis Towers Watson are the lead insurer and broker for Ethiopian Airlines.
Torsten Jeworrek, Munich Re chair of the reinsurance committee, recently said the reinsurer’s exposure could be between €100 and €120 million.
Research from Deutsche Bank suggested that US airline operators Southwest and American airlines have a degree of confidence in the aircraft. The companie are the largest and tied-for-second largest operators of Max aircraft.
Analysts from the bank reported: “A recent communique from the Southwest pilots' union highlighted that data from 41,000 flights (with each MAX aircraft having 17,000 recordable parameters) supports the company's ‘continued confidence in the airworthiness and safety of the Max.”
Bank analysts said the management teams from both operators thought that the grounded aircraft were likely to return to service before the end of the June quarter.
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