Airlines face doubling in war insurance premiums after Sudan losses-sources

Airlines face doubling in war insurance premiums after Sudan losses-sources

Airlines face doubling in war insurance premiums after Sudan losses-sources – Airlines could end up paying twice as much for insurance they need to protect themselves against losses triggered by war after a bruising year wiped out aviation war insurers’ revenue for 2023, industry sources say.

Aircraft were destroyed at Khartoum airport in a conflict between military factions in Sudan that erupted earlier this year, resulting in losses of between $240 and $300 million, according to three aviation insurance sources.

The losses incurred in Sudan represented the total global annual premium in the niche aviation war insurance market, two of the sources said.

Insurers are as a result weighing a potential doubling of the premiums on such policies when airlines typically renew cover in the fourth quarter, the sources said.

The sources declined to be named due to client confidentiality.

Insurers are already feeling the pinch as they face legal action for up to $10 billion in claims from around 400 aircraft stuck in Russia after sanctions on the country following its invasion of Ukraine last year.

Some have since cut back on aviation war coverage to minimise future losses amid the conflict.

The exposure to losses from Ukraine and Sudan has fed through to the reinsurance market. Reinsurers insure the insurers, who typically pass on any extra payments for reinsurance to their customers.

Some types of aviation war reinsurance saw rates rise by up to 100% at the key July 1 renewal date, according to a report this month by broker Gallagher Re.

Most aviation war cover is provided by players in specialist insurance market Lloyd’s of London, such as Lancashire (LRE.L) and Atrium. Lancashire declined to comment and Atrium did not immediately respond.

Airlines cannot operate without war insurance, according to industry experts. The policies can protect them against a range of incidents including confiscation of aircraft or being shot down from the air.

The aviation war insurance market saw a surge in prices in the aftermath of the 9/11 attacks in the United States in 2001. Premiums then gradually fell for many years, in line with a broader softening in insurance rates and a slowdown in claims.

READ: Short Term Health Insurance Colorado

But that pricing trend has changed in recent years. Two aviation war insurance buyers that are members of British trade body Airmic said aviation war premiums doubled in 2022, an Airmic spokesperson said, following the war in Ukraine.

One insurance buyer expected to see a further doubling of rates this year, though the other saw a smaller increase, due to competition in the market, the spokesperson added.

An aviation insurer who declined to be named also said underwriters were looking for 100% increases in aviation war rates this year, but added that airlines’ brokers were pushing back against such large rises.

Discover more from LoveyBlog - Lovey Insurance Blog

Subscribe now to keep reading and get access to the full archive.

Continue reading