Liability claims related to the Ethiopian Airlines crash and the grounding of Boeing 737 MAX 8 aircraft could be the largest non-war aviation reinsurance claim on record, hitting reinsurers’ profitability, reinsurance broker Willis Re said.
The crash of Ethiopian Airlines flight ET 302 on March 10 killed 157 passengers and crew, the second deadly crash involving a Boeing Co 737 MAX 8 airliner in five months.
As the crash site and black boxes are investigated, the 737 MAX 8 has been grounded worldwide as a precautionary measure and regulators are stepping up action to improve air safety while Boeing is carrying out a software upgrade to the plane’s automated flight control system.
Liability claims for the passengers’ loss of life and in relation to the grounded aircraft could total around a billion dollars, James Vickers, chairman of Willis Re International, told Reuters by phone, a large sum for the aviation reinsurance market which Vickers said was “very small and very, very specialist.”
Reinsurers help insurers share the cost of large claims, in return for part of the premium.
The losses could erode three to four years of aviation reinsurers’ premium in the “global excess of loss” category of reinsurance, Willis Re said on Monday in its summary of reinsurance activity at the key April 1 renewal date.
In excess of loss reinsurance, the insurers are on the hook for the first part of the claim, and reinsurers only pay out on claims above a certain level.
The world’s biggest reinsurers include European firms Munich Re, Swiss Re and Hannover Re, U.S. billionaire global investor Warren Buffett’s Berkshire Hathaway and companies operating in the Lloyd’s of London market.
British insurer Global Aerospace led a consortium of insurers and reinsurers providing cover for Boeing.