Germanwings crash insurers set aside $300m for loss

"This initial reserve includes both compensation payments to the next of kin of the passengers, as well as the hull value of the aircraft, as well as other costs such as accident support and investigation services on the site of the crash, legal support, and assistance for the next of kin," said AGCS. The liability claims will account for the bulk of the loss. Experts expect the claims to amount to between one and two million euro per passenger killed. Given that all 150 passengers and crew lost their lives this would amount to an insured loss in excess of €150m. AGCS said that every claim will be fully honoured on an individual basis, but that this will take some time. "This is why Lufthansa Group, with support from its insurers, is offering an immediate interim payment of €50,000 on behalf of Germanwings to next of kin to address immediate financial needs," said the insurer.hideThe insured sum for the aircraft is only €6.5m because the plane was already 24 years old. It remains unclear how the insured loss will be distributed among the individual insurers in the consortium. Among others Talanx, which owns German industrial insurer HDI-Gerling, and US-based AIG are part of the group. So far only Talanx has given any figures, saying that its share is a gross two-digit-million euro figure, which becomes a single-digit-million sum when reinsurance cover is factored in. Rating agency AM Best does not believe that the crash will leave major dents in insurers' results. "AM Best does not expect to take any rating actions in response to this single large loss," said the rating agency. It added that given its comprehensive reinsurance scheme, the losses for Germanwings' captive insurer Delvag will be materially reduced. The most likely explanation for the crash-the suicide of its co-pilot-will not significantly affect the costs facing the insurance industry. Lufthansa's liability insurers have to pay the claims regardless of the cause of the crash. However, the cause is relevant for the airplane's hull policy. The terms and conditions of the hull policy exclude losses due to war, terrorism and so-called malicious acts. If the co-pilot crashed the plane on purpose this would be regarded as a malicious act. Such acts would be covered by Lufthansa's war risk insurance consortium, which is led by Lloyd's of London insurer Cathedral Underwriting that is owned by Lancashire Holdings. Although the hull loss is only €6.5m, it may have an impact on the already stressed market for hull war insurance. "There was an unusually high incidence of aviation losses in 2014, and this recent loss may put further pressure on the beleaguered aviation war sector," said AM Best's director, analytics, Catherine Thomas. Some of the major losses last year included Malaysia Airlines flight MH-370 that disappeared without trace, Malaysia Airlines flight MH-17 that was shot down over Ukraine and aircraft losses during fighting at Tripoli airport in Libya. Premium rates for war risks rose in 2014 due to increased claims activity. "However the level of increase was disappointing given the magnitude of losses, and upward momentum stalled towards the end of the year," said AM Best.

Germanwings crash insurers set aside $300m for loss

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