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Allianz has 10 percent share of Madrid crash

Allianz has a 10 percent share of the slip for the Spanair McDonnell Douglas MD-82 that crashed at Madrid airport on Wednesday, claiming 153 lives.

A spokesman for the German insurance giant confirmed Allianz has a 10 percent maximum exposure on the policy for SAS, the Scandinavian airline which owns the charter carrier Spanair that operated the flight.

Although the overall loss remains uncertain, market sources are estimating liability exposures in the region of $250mn-$300mn based on estimates of individual liability pay-outs. This, however, remains moveable dependent on factors such as causation and whether any US liability can be determined.

According to sources, aviation pool Global Aerospace Underwriting Managers Limited (GUAM) also has a share of the slip, in addition to Allianz. Other leading insurers include American International Group (AIG), with an approximate 11 percent share; ACE, with a 10 percent share; Amlin with 7 percent; and QBE with 6 percent. Other, smaller markets are thought to include Indian insurer General Insurance Corporation and a number of Lloyd’s insurers such as Catlin.

Last month Munich Re and Berkshire Hathaway completed their acquisition of SCOR’s stake in GAUM. Berkshire Hathaway owns 60 percent and Munich Re 40 percent of GAUM’s shares.

“Initial estimates tell us that we have an immaterial exposure to personal liability and hull exposures,” said Marco Circelli, head of Investor Relations at French reinsurer SCOR.

The hull loss is likely to be in the region of $10-$15mn, suggest sources.

ACE is lead underwriter on the $1bn programme which was placed by Aon Ltd on behalf of aviation group SAFIT, which buys insurance for SAS.

Wednesday afternoon’s crash happened when a McDonnell Douglas MD-82 swerved off the runway shortly after take-off from Terminal Four of Madrid’s Barajas airport. Initial reports suggested a fire had broken out in one of the plane’s engines, while Spanish media has said the pilot reported a fault with a temperature gauge, thought to have been fixed.

At $250-$300mn, the estimated loss is less than that of July 2007’s loss of a TAM Airlines Airbus-320 in Brazil, which claimed the lives of all 189 people on board.

It is understood that some underwriters are now reserving for a total market loss of $400-$450m for the TAM crash, a significant upward revision on initial estimates of $200-$300mn.

According to one senior London market aviation broker, the Madrid crash could be the event that finally turns around the ailing aviation market, which continues to endure a weak rating environment caused by over-capacity. “I think the market is poised for change, and this could be the event that sets it off,” he said.

Investigators have begun examining the wreckage of the plane and will analyse the flight data and voice recorders, which have been recovered.

According to a spokesman for Spanair, the plane passed a safety inspection in January.

Aon, GAUM, QBE and GIC were unavailable for comment. ACE and AIG declined to comment.

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