Dubai floods put $8bn of aircraft at risk, estimates Russell Group
Aircraft with a value of $8bn on the ground at Dubai’s airport were at risk of damage during unprecedented rainstorms last week, according to calculations from data and analytics firm Russell Group. Of 190 aircraft on the ground when the storm struck, 131 were operated by airline Emirates.
“Last week’s reports on the Dubai airport deluge focused on flight delays and cancellations, but it almost went unnoticed that $8bn of aircraft on the ground was at risk of being damaged by the intense rainstorm,” Russell Group said.
Dubai airport was closed for a period during the storm, with disruptions reported following its reopening. Transport and power in the United Arab Emirates has also been affected.
Suki Basi, managing director at Russell Group, said there will need to be an assessment of the extent of the damage to all aircraft on the ground in the aftermath of the rain and floods. He added that the unusual storm raises risk accumulation concerns for insurers and reinsurers.
“For aviation (re)insurers looking to manage the exposures of their corporate insured clients, an event like this is a clear example of the potential impact of severe weather events on grounded aircraft,” Basis said. “This event highlights the need for robust data and analytics that shine a light on potential ground accumulation exposures across all airports.”
Rating analyst S&P said it expects claims relating to damage to key infrastructure from the storm, including Dubai’s airport and rail network as well as large shopping malls “heavily affected” by the weather event. But it said the impact on local insurers is expected to be limited, with such risks typically ceded to reinsurers.
S&P said while it is too early to assess the full financial impact of the rain and floods on the UAE’s insurance sector, for most it will be earnings impact. However, it added that “the capital and liquidity buffers of insurance companies with weaker capitalisation could be tested”, with claims for motor and property likely to make up the majority of losses for local insurers, and commercial risks likely to be borne by international reinsurers.
The analyst added that the event could impact rates for affected lines of business. “We also anticipate that rates for insuring commercial and residential property risks could increase as local insurers and international reinsurers review their pricing following a rise in the frequency and severity of rainstorms in the UAE and neighbouring countries,” it said.