Kevin O'Toole/LONDON
THE GROWING COST of passenger-liability claims has begun to raise alarm in insurance markets, following early predictions that 1994 was a record year for airline losses.
The total bill for major hull and liability losses on Western-built passenger jets leapt to more than $1.5 billion in 1994, according to provisional estimates from Airclaims, the London-based loss-adjuster firm.
Concerns centre on the fact that the value of claims has rocketed, despite a relatively average year for the number of aircraft losses and passenger deaths.
The fear is that a worse year could leave the insurance market facing a funding crisis.
Airclaims points out that the number of passenger fatalities at 870 is actually below the average for the 1980s, but the value of claims jumped to their highest for a decade, largely because of a heavy number of expensive fatalities on US and Japanese flights. At around 250 each, they accounted for the bulk of deaths. The liability reserve for the USAir Pittsburgh crash on 8 September is alone being put at around $375 million by insurers.
The number of jet-airliner hull losses were also little above the average and the total was below that for 1993, yet the value of claims rose by 9% on the Airclaims figures.
With the addition of losses for turboprops and CIS-built aircraft, as well as a running rate of $300 million for minor "attritional" losses, Airclaims estimates that the insurance market may face total claims of around $2.2 billion.
On a crude calculation, the premium income for 1994 was only $1.3 billion, so leaving underwriters with a heavy deficit and the prospect of a hike in insurance rates.
Leading insurance broker Willis Corroon suggests that rates rose only modestly in the latest October round of renewals, but warns that the market is likely to tighten in 1995. That will depend not only on the scale of losses, but on the volume of underwriting capacity in the market. The level has been running comfortably at around 200%, but competition is likely to contract following the 1994-loss figures.
Source: Flight International
