In double bonanza for airlines, insurance cost too falls

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Published: July 3, 2015 9:38:21 AM

In spite of some large claims, insurance cost for the airline sector globally is likely to fall this year and for the domestic carriers due to intense competition and better risk management practices by the industry, says an international aviation insurance expert.

In spite of some large claims, insurance cost for the airline sector globally is likely to fall this year and for the domestic carriers due to intense competition and better risk management practices by the industry, says an international aviation insurance expert.

This comes as a double bonanza for the bleeding airlines due to the steep fall in fuel prices following the massive crash in crude prices since the middle of last year.

This is despite some large claims in overseas markets following a string of air crashes in the recent months like the Germanwings, a subsidiary of Luftansha, in March which was crash-landed by its junior pilot.

“Despite a rise in volume in aviation insurance business here, the overall premia have fallen as the rates have remained soft in the global markets. We do see premia falling further here in the days to come. The reason being that there is too much of competition in the market,” Martin Stevans, chief underwriting officer at Global Aerospace, a unit of AIG, told PTI.

Stevans, however, did not quantify the fall in premium cost for the bleeding airlines, which have lost billions of dollars due to accidents and spike in oil prices last year.

Being a reinsurance-driven industry, more than 95 per cent of the domestic aviation insurance finds reinsurers in the London market, which is the most competitive market.

Stevans feels that due to intense competition and better risk management practises by the domestic carriers, the premium set to fall further this year.

AIG, which is the largest global aviation insurer with a 15 per cent market share, leads in providing reinsurance business to Air India and Jet Airways.

“Air India’s reinsurance premium had gone up after Mangalore crash last year, but the same is going to come down this year as there have been no accidents” he said.

Noting that global aviation reinsurance market has shrunk in recent times, he said “the market size which used to be at USD 3 billion until a few years ago, is almost half the size now despite a rise in traffic as well as in the number of aircraft.”

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