A380 will drive up everyone's insurance

[747FOCAL]

AON AVIATION GROUP, IL says the A380 will be responsible for an increase in airline liability insurance for entire
industry; it expects airlines will have to carry $3b in liability limits (vs typical $1.5b-$1.75b) to indemnify themselves.

[Tallbloke]

The article in this weeks "Flight" does not mention an increase in costs, it mearly points out that airlines are seeking other ways to insure their aircraft if the traditional aviation insurance market cannot provide a cost effective product.

Wayne Wignes, president of Aon, remarked here (http://biz.yahoo.com/prnews/050124/cgm055_1.html) that A380 operators are investigating increasing their passenger liability cover to $3 billion and that airlines are prepared to look elsewhere to find the cover if the current suppliers cannot provide a suitable product.

Sounds to me more like a warning to the aviation insurance market rather than "yet another reason why the A380 is a bad thing".

[747FOCAL]

Did not put it up as an "A380 is a bad thing thread". :p

[WHBM]

If the A380 represents a 30% capacity increase over a B744, and hull costs roughly in proportion, why should liability limits go up 100% ? And even if they do the premiums should not go up nearly as much, as almost all claims are well under the liability limit.

[aviate1138]

747FOCAL said......

Did not put it up as an "A380 is a bad thing thread".

As history tends to repeat itself did the 747 introduction, way back when, not result in increases in insurance?

Aviate1138

[MarkD]

A380 will put everyone's insurance up, but that's a good thing?

Leaving 747FOCALs uncanny knack of uncovering A380 stories aside, stories which never seem to have affected a 747 variant, I daresay the liability increase may be due to:

a) A380 flying to highly urban areas
b) the likely damage a fully loaded 380 might cause if it impacted a city block.

Why a EMB145 operator would be affected by this, for example, might be if the industry rewrote rates affecting all aircraft if this had not been done for a while. I find this hard to credit since the insurance upheaval post 9/11 but I will wait for someone with a little less form than 747FOCAL before making up my mind.

[swh]

747FOCAL,

Dont know why insurance prices will go up.

The 744 is certified for 660 pax, the A380 will be have 550 initially.

744 never had upper deck pax evac testing, so no one knows (i.e. higher risk) if those passengers ever would be able to get out in an emergency. A380 will be certified with testing (i.e lower risk).

B747 cargo hold fire supression systems have always been way out of wack with the distances it flys from suitable alternates, ( i.e. higher risk).

Of the worlds 100 worst aviation accidents, which over 18,500 people have been killed, over 9000 people have been killed in accidents involving civil Boeing products (B707-B747 i.e. 49% of deaths, not including deaths from products not of its original design like McD and Douglas which it now owns which have killed over 3000 people). Over 3500 people alone involved B747's (19%).

In the world worst aviation accidents only one features an aircraft in the A320/A330/A340 product family, contributing 143 people or 0.77% to the total death toll in the world worst 100 accidents.

Given the low hull loss rate in modern Airbus family products resulting in deaths, I cannot see how one could see and increased risk. And I cannot see a manufacturer letting Boeing get away with such a scare campain given its history.

Over 80% of B747 operations in the US are from airports which do not meet the full US generic design standard for the type, known as ‘Group V’, and therefore have been granted waivers. A similar situation exists at several other large international airports that do not meet the full ICAO Code E generic design standards which are required for the B747, ( i.e. higher risk).

More than 60 airports worldwide are preparing for A380 commercial operations, which commence in less than 18 months. US Federal Aviation Agency Advisory Circular (FAA AC) 150/5300, which classes aircraft in Groups I to VI. The A380 falls into the ICAO Code F and FAA Group VI categories, the airports have had several years to prepare for A380 operations, and initially will only be flown over set routes and to airports that have had time to prepare for its arrival.

So given the concessions and history that the B747 had, and still has, I cannot see why insurance companies would increase risks for the aircraft, sounds like another Boeing Plant ploy to take attention away from airbus for its own products which are not doing too well.


:rolleyes:

[Lu Zuckerman]

Assuming the loss of 500 passengers on the A-380 and assuming the court cases are tried under US Tort law the cost would be 1.35 Billion not including the hull loss. If in the process of the legal case it can be proved that either Airbus or the operator tried to cover something up there is no limit to the liability. It could bankrupt an airline and put a severe dent in the Airbus coffers.

:E :E

[lead zeppelin]

Of the worlds 100 worst aviation accidents, which over 18,500 people have been killed, over 9000 people have been killed in accidents involving civil Boeing products (B707-B747 i.e. 49% of deaths, not including deaths from products not of its original design like McD and Douglas which it now owns which have killed over 3000 people). Over 3500 people alone involved B747's (19%).

In the world worst aviation accidents only one features an aircraft in the A320/A330/A340 product family, contributing 143 people or 0.77% to the total death toll in the world worst 100 accidents.


Hardly a fair comparison, swh.

The A320 entered service in March 1988, the A-340 in March, 1993, and the A-330 in March, 1998.

You are comparing these aircraft accident rates to older Boeings such as the 707, 727, 737, and classic 747's?

Not a fair comparison when you consider the advance of avionics, navigation, CRM, weather forecasting, etc. that the A320/330/340 have the luxury to fly with. Also, how many more hours of service do you think the Boeing line has accumulated?

Lets look at the bigger accidents. According to the "world worst 100 accidents" you mention, the first two are the 767's of 9/11 including the people in the towers. Rather difficult to blame the 2299 fatalities on the design of the 767.

The next largest was Tenerife's 583 fatalities. Again, difficult to blame the 747 design for a KLM Captain taking off in dense fog with no clearance.

Others? 1985 Air India 329 fatalities and 1988 Pan Am 270 fatalities both due to a bomb, and Korean Airlines 1983 269 fatalities after being shot down. Also Egypt Air Oct 1999 217 fatalities due to probable pilot suicide, Ethiopian Airlines 1996 125 fatalities due to hijacking, etc. Once again, difficult to blame these designs for these accidents. Remove these and others from the data and simply compare accidents per 100,000 hours will paint a different picture.

How about a comparison of Boeings which entered service after March, 1988 (when the A320 entered service)? The 777 has zero fatalities since entering service in 1995. The 737-600/700/800/900 has zero as well. Compare this to just one A320 accident in Oct 1992, when an Air Inter crew couldn't program the Flight Control Unit and 87 died when they hit the trees

Statistics can say anything we want them to say, if presented in a certain way. I have no issues with Airbus products; they are fine aircraft, as are Boeing. But, let's not try to present flawed numbers to make a weak point.

I think what 747focal is trying to say is that insurance capacity is limited, and having these aircraft out there adds 'demand' to a limited 'supply, and Economics 101 means higher prices, regardless of how good all these new aircraft are.

[swh]

lead zeppelin,

Exactly the argument I was hoping that would come back...

Using your logic then....modern aircraft are safer than the older ones...so why should the insurance go up !

QED

:rolleyes:

[speedbird_heavy]

I cant see why people want the A380 to be branded a failiure. Why would the A380 (alone) push up insurance premiums?

[ferrydude]

Insurance 101. Greater exposure to risk in one area results in higher premiums for all.

[Biggles Flies Undone]

747FOCAL can you give a source for that statement, please? It certainly doesn't say that in the Flight article.

It’s a bit of a puzzle – there is plenty of capacity available in the aviation insurance market for a $2 billion limit and if it is deemed that $3 billion is required then that should be achieveable. It might be necessary to ‘pay up’ a bit for the extra capacity as the top level insurers won’t get the spread of risk they get by only writing the few operators that carry the top limit – but why would that affect prices for the majority of airlines that stop at $2 billion or below?

One of the most important factors that determine the cost of insurance is the cost of claims – and a 747 full of Americans is going to cost more than an A380 full of Europeans.

[seacue]

One point I don't see mentioned is the situation when a non-380 is at fault and manages to destroy a 380 in a collision. That is a real possibility. Unlikely, but all aircraft losses are rare events. This risk could be expected to affect everyone's insurance cost.

But why should the increase be more than proportional to the increased size of the 380 and moderated by the small number of 380s in the world fleet?

[ElectroVlasic]

swh:

Thanks for your informative posts. I'm learning a lot about how aircraft insurance works. Just want to bring up one thing. You said:
The 744 is certified for 660 pax, the A380 will be have 550 initiallyAccording to Flight International, 11 Jan 2005,Airbus will conduct a trial emergency evacuation using the fourth A380 (MSN007) with 853 passengers to certificate the exit limit for the ultra-large aircraft.So isnt the true scale up, as seen by the insurance folks, 853/660 or an increase of ~30%?

--ev--

[seacue]

One point I don't see mentioned is the situation when a non-380 is at fault and manages to destroy a 380 in a collision. That is a real possibility. Unlikely, but all aircraft losses are rare events. This risk could be expected to affect everyone's insurance cost.

But why should the increase be more than proportional to the increased size of the 380 and moderated by the small number of 380s in the world fleet?

[747FOCAL]

Biggles Flies Undone,

The clip came from last friday's SpeedNews.

swh, :rolleyes: No airline couuld put passengers on the upper deck of the 747 if it was never EVAC certified.

and...... If you count how many aircraft Airbus has lost at airshows the amount of Airbus hull losses goes up by a factor of what 3? :E

[lead zeppelin]

swh;

If you read my last paragraph, I mention basic supply and demand and was trying to clarify my interpretation of what 747focal was saying.

Insurance rates are affected my numerous factors, capacity being one of them and losses another.

But, the major factor is the investments the insurer makes with premiums before paying losses. If the investment returns are good, then rates go down as insurers look for more premium income to invest. If investment returns are poor, rates go up in order to maintain adequate reserves for losses.

The question then becomes.......Would rates be higher, all other things being equal?

My guess is no, quite honestly, unless the aircraft presents a greater risk than existing airliners.

My reply to your post was more of a response to what appeared to be an attack on Boeing.

You said, among other things "And I cannot see a manufacturer letting Boeing get away with such a scare campain given its history........sounds like another Boeing Plant ploy to take attention away from airbus for its own products which are not doing too well."

The article 747focal refers to was based on comments by an "expert", the president of Aon Aviation Group, an insurance broker; Boeing had nothing to do with the article.

[Biggles Flies Undone]

lead zeppelin - that was true before Sept 11th. After that, a lot of traditional capacity bailed out and was replaced by 'capital providers' such as Warren Buffet's Berkshire Hathaway who expect a far better return on capital than the traditional Lloyd's Names and general insurers. Rating is at a higher level than in the 'old' days and also much less volatile.

[swh]

lead zeppelin,

Sorry, I am very cynical where these "experts" pop up from, I get the same way every time there is an election. My take on the article was that if you buy Boeing your insurance wont go up.

747FOCAL,

I suspect your twisting of my words were not accidental, I did not say "EVAC certified". No slides were tested for 747-100 ecav as part of its certification, in the original certification a number as low as 8 people were demostared to use the internal stairs to get out of the upper deck, however these people were included in the lower deck ecav demo number. Later models, and upper deck slides were done by analysis only, with special conditions written in a seperate document 25-71-NW-3 from the FAA to Boeing.

I am now curious as to what this factor of 3 is with airbus aircraft crashes at airshows...three people were killed, and 133 survived the Air France A320 crash on a low-level flight during an air show at Mulhouse-Habsheim on June 26, 1988, not really a factor of 3 ?

ElectroVlasic,

The 744D is operating now with JAL with 546 pax, certifed for 660 with very little range. The A380 will initially operate with 550 pax, certifed 800+, with fuel to enable it to go somewhere.

:ok:

[lead zeppelin]

I partly agree, Biggles, but corporate capital had begun to replace the names well before 2001. Corporate capital was allowed beginning 1994 in response to the withdrawal of private names stemming from the lawsuits for shabby underwriting; corporate was the only answer to replace them, and by 1997 had accounted for over half the capacity. I think it's now about 80%.

There's a good report on aviation insurance for those who are interersted at http://www.swissre.com Click "Research and Publications" and look for "The True Value of Aviation Insurance" (it's a pdf you'll need to download)

[mickjoebill]

Since we are talking about the unthinkable,

Would insurance companies have access to crash worthiness data before deciding premiums?

Will double deck alter survival rates for some of the occupants..

Maybe less safe up top if aircraft catches fire but in principle at least more safe in a "crash landing"?

I know... every crash is different

Mickjoebill

[ShotOne]

Having read through this thread and the article in Flight Intl that I suspect prompted it, I can't find any justification for the title. Some operators will want an increased indemnity figure -but that doesn't mean everyone elses insurance is driven up.

I can't help feeling that some ppruners from the USA are just miffed that their lovely 747 isn't the biggest kid on the block. Come on guys, size isn't eveything...

[ElectroVlasic]

Well, folks are pointing out the issues in becoming the new big guy on the block. The 747 dealt with it, and the A380 will too. Hopefully the A380 proponents will be calm and professional as they work through the issues, not spiteful like Herr Schroeder...

--ev--