Industry sources have identified the lead underwriter and broker for the EgyptAir flight that went missing this week, now believed to have crashed into the Mediterranean.
XL Catlin was the lead insurer for the Airbus A320, whose hull is said to have been worth $18 million.
Marsh was the broker. Both declined to comment on the incident, which officials have said is “almost certainly” the result of terrorism.”
The plane was en route from Paris to Cairo when it swerved sharply upon entering Egyptian airspace and crashed into the water. Fifty-six passengers were confirmed to have been on board, including three children. Seven crew members and three security staff members were also lost in the incident.
Wreckage from the flight was originally reported to be found near Karpathos Island in Greece, but later reports said the wreckage was not from the EgyptAir Flight.
The eventual insurance payouts from XL Catlin will depend largely on the cause of the crash. Though initial reports suggested a technical failure, a senior Egyptian official later said terrorism was a likely cause.
“Let’s not try to jump to the side that is trying to identify this as a technical failure – on the contrary,” said Egyptian Aviation Minister Serif Fathi.
“The situation may point – and I say ‘may’ because I don’t want to speculate and I don’t want to go to assumptions like others – but if you analyze the situation property, the possibility of having a different action, or having a terror attack, is higher than the possibility of having a technical [fault].”
If it does appear that the crash was a deliberate act of terrorism, it must be certified. If that is in dispute, it may be difficult for insurance companies to settle payouts.
For example, the gunning down of Malaysia Airlines Flight 17 near the Russia-Ukraine border complicated insurance coverage due to a “wartime exclusion” that is often included in aviation hull and liability policies. While it is unlikely the EgyptAir crash was the result of an act of war, certain other exclusions—perhaps for terrorism —may apply.
Liability costs may also vary depending on victims’ nationalities, as governments differ over how citizens can sue airlines for damages.
The loss of the EgyptAir jet is just the latest in a long line of aviation tragedies in recent years, including two Malaysia Airlines crashes and the purposeful crash of a Germanwings aircraft last year.
Aviation insurance experts have predicted a subsequent increase in market premiums in the wake of these events – an increase that has already taken place in some cases.
The Centre for Asia Pacific Aviation reported premium increases of 10 to 20 per cent for all-risk policies last year, and a report from
Lockton Companies estimates the cost of insuring a plane against attack will nearly double.
As of last year, insuring a new aircraft worth $200 million would cost an airline about $40,000. Now, that figure could jump to $80,000.
“For a number of years, abundant capacity has placed considerable pressure on pricing, as well as terms and conditions, across all aviation lines,” said Catherine Thomas, director of analytics at AM Best. “At the beginning of 2014, rates were significantly below peak levels,” and despite a few losses, the market was still profitable.
But now, “losses will considerably outweigh premiums written, and insurers are expected to react with substantial rate increases,” Thomas said.
