Aon: Airline insurers have worst month since 9/11
Axa SA, Allianz SE and American International Group Inc. lead a group of airline insurers poised to record the most monthly losses since September of 2001 and may raise prices to bolster reserves, Aon Corp. said.
Costs to indemnify the families of victims of the Air France crash off the coast of Brazil and the Yemeni Airbus accident in the Indian Ocean will make June the second most expensive month for the business, Chicago-based Aon, the world's biggest insurance broker, said in a report e-mailed today.
Insurance rates may jump this year after fatal crashes and near disasters, including the Buffalo, New York-area accident that killed 50 and Chesley "Sully" Sullenberger III's splashdown in the Hudson River, which was survived by all on board. Insurers, which share coverage of jets and air carriers, must pay to replace lost planes and compensate the families of deceased passengers.
"With losses so far this year already above the full year average, the industry is likely to see insurance premiums rise significantly," Aon said in the report. "This will be a bitter pill to swallow" for airlines purchasing coverage, Aon said.
Total claims for 2009 may exceed $2.2 billion, which is 57 percent higher than the "long-term" annual average of $1.4 billion, Aon said. The $2.2 billion estimate is based on costs for the second half of this year meeting historical norms.
More Than 300 Dead
The Air France-KLM operated flight, which killed 228 people, was bound for Paris on June 1 when it plummeted into the ocean. That flight may be the most expensive for the industry since 2001 when a flight from AMR Corp.'s American Airlines crashed in Queens, New York killing 265 people and costing about $600 million, according to Stephen Riley, executive director of Global Aerospace Underwriting Managers Ltd., which has 7.5 percent of the Air France flight's coverage.
Axa is the lead insurer of the flight, which was also covered by insurers including Allianz and AIG. The costs of crashes are based partly on estimates of the travelers' nullified lifetime earnings and any negligence demonstrated by the airline.
The Yemenia Airways Inc. plane, carrying 153 people, was bound for the Comoros Islands on June 30. A teenage girl was the only survivor found in initial rescue operations. The Buffalo- area accident occurred on a flight operated on behalf of Continental Airlines Inc. by Pinnacle Airlines Corp.'s Colgan unit. Sullenberger's water landing in New York was on a US Airways Group Inc. flight.