There has been mention of airline insurers ‘taking the money in the good times’ and ‘running in the bad times’. Just to put this into perspective, for the three years starting 1 January 1998 total worldwide airline insurance premiums (excluding hull war risks) were around US$3.2 billion and losses for the same period were in excess of US$5.3 billion. The terrorist attack in Sri Lanka took away ten years worth of hull war premiums.
This year the insurance market was seeing sustained premium increases for airlines – not enough to return the market to profitability in a year of ‘average’ claims, but certainly in the right direction.
Can anyone honestly argue that nothing should be done in the aftermath of the attack? I hate knee-jerk reactions and the restriction in third party liability coverage is a big concern – but it will do nobody any good if there are no insurers left to carry the risk after the dust has finally settled.
Airline insurers have to cover massive exposures ($200m for a hull and $2bn for liability) off an incredibly narrow premium base. I read somewhere a few years ago that worldwide airline premiums were less than one percent of the U.S. plate glass insurance premiums. How many plate glass policies have a potential exposure in excess of two billion dollars?