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Malaysia Airlines liability loss likely to be $200mn-$250mn

Aviation market sources moved swiftly on Friday (14 March) to rubbish a $500mn liability loss estimate for Malaysia Airlines flight MH370 from a Credit Suisse Asset Management fund.

One senior broking source described it as "unhelpful". Another source wrote it off as "ill-informed".

Although some funds will write industry loss warranties for marine retro triggering at the $500mn mark, DCG Iris said that it "has no exposure to aviation risk", further calling into question the company's ability to assess a loss of this kind.

An underwriting source said that it was too early to give an informed estimate for the loss, but that previous claims experience suggested that it was likely to come in at around $200mn.

A broking source said the loss was expected to be in the region of $250mn, although he also stressed that anything other than a tentative loss forecast was impossible at this stage.

Another broking source said he believed $250mn would be more than adequate to pay the claim and added that it could come in at less than $200mn.

Whether or not terrorism was the cause, the liability loss will still be paid by the insurers on the Willis-brokered hull and liability package.

However, the terrorist link could influence the size of the liability payout, he said. If the passengers were aware for a long period that the plane was set to go down and had to suffer the trauma of a hijacking, then the awards could come in closer to $250mn.

With a likely total loss of $300mn-$350mn, aviation sources said claims related to Malaysia Airlines flight MH370 will hurt the primary market, but are unlikely to make any difference to the sharp softening of rates seen in the fourth quarter of 2013.

A loss of this level may touch the bottom layers of some reinsurance treaties, they said, but the vast majority of the loss will be retained in the primary market.

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