Airplane Insurers Return to Profit on Fewest Deaths Since 1984
Jan. 25 (Bloomberg) -- Lloyd's of London Chairman John Nelson talks about the outlook for the insurance market in 2012 and the city of London's appeal to overseas businesses. He speaks with Maryam Nemazee on Bloomberg Televsion's "On the Move" on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland. (Source: Bloomberg)
Aviation insurers, a group including American International Group Inc. (AIG) and Allianz SE (ALV), probably had their first underwriting profit in five years as fatalities fell to the lowest level since 1984, broker Aon Corp. (AON) said.
Insurers collected about $1.8 billion in renewal premiums last year, and incurred an estimated $1.13 billion in claims, the Chicago-based insurance broker said in a report today.
“The low level of claims in 2011 has meant that the market is estimated to have enjoyed healthy returns overall,” Aon said in the report.
Insurers benefited from reduced costs after the 2009 Air France crash off the coast of Brazil and engine failure on an Airbus SAS A380 jet operated by Qantas Airways Ltd. (QAN) in 2010 contributed to industrywide underwriting losses those years. Flying is now about twice as safe as it was 15 years ago, according to a report this month from Ascend, a data and analytics provider for aerospace investors.
Last year’s worst crash happened July 8, when 83 people died after a Hewa Bora Airways Boeing Co. 727-100 undershot the runway on landing in Kisangani, Congo, Ascend said. Thirty-five people survived the crash.
Other fatal incidents included an Iran Air Boeing 727-200 crash that killed 69 passengers and nine crew members in Orumiyeh, Iran, in January 2011. A Rusair Tupolev 134 crash in Petrozavodsk, Russia, killed 45 people in June. In September, a Russian plane carrying the Lokomotiv Yaroslavl hockey team crashed into a river juts after takeoff, killing 44, according to Ascend.
Airline Fatalities
There were 175 fatalities covered under standard liability policies through the first 11 months of last year, compared with an average of 582, Aon said in a report last month. Not all incidents are covered by insurance.
AIG sells the most aircraft protection among U.S.-regulated providers, with 21 percent of the market, according to 2010 data compiled by the National Association of Insurance Commissioners. Allianz (ALV) ranks second and Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) is third.
Prices for hull and liability protection fell 3 percent for coverage placed in 2011, as the low level of claims increased capacity, pressuring rates, according to Aon. Premiums may be little changed or decline in 2012 for airlines that have well understood risks, the broker said.
“A single major incident could harden the market quickly, however, particularly given the high level of claims prior to 2011,” Aon said.
To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net
To contact the editor responsible for this story: Dan Kraut in New York at dkraut2@bloomberg.net
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