Newspaper article International New York Times

Allianz Will Pay Part of 3 Air Disaster Claims ; German Company Lead Reinsurer for AirAsia and Malaysia Airlines

Newspaper article International New York Times

Allianz Will Pay Part of 3 Air Disaster Claims ; German Company Lead Reinsurer for AirAsia and Malaysia Airlines

Article excerpt

The German insurance giant faces responsibility as the lead reinsurer for AirAsia and Malaysia Airlines.

The German insurance giant Allianz will be partly responsible for an estimated hundreds of millions of dollars in payouts on three major passenger jet disasters this year, including that of AirAsia Flight 8501, debris from which was apparently found on Tuesday.

The AirAsia flight, which was en route to Singapore from Surabaya, Indonesia, had 162 people aboard when it disappeared on Sunday. Allianz confirmed Monday that it was the lead reinsurer for AirAsia. In addition, Allianz was lead reinsurer for Malaysia Airlines, which experienced two disasters this year: the disappearance of Flight 370 in March and the crash of Flight 17 into territory controlled by Ukrainian rebels in July.

Including the latest disaster, industry experts estimate that aviation insurance companies would have to pay out about $1.8 billion for airline claims this year, with perhaps one-third of that from just the two Malaysia Airlines disasters. Because of the nature of risk-sharing in insurance, however, no single company is likely to be on the hook enough to endanger its financial strength.

Because the payout for a major air crash would prove overwhelming to a single insurance company, the risks are typically spread among a primary insurer and a second tier of financial backers known as reinsurers, which then form a consortium to distribute the risk among themselves. The lead reinsurer takes the largest risk, with the losses divided in accordance with each member's stake in the consortium. The group can include 20 or more members.

Allianz's global corporate and specialty unit, one of the world's biggest reinsurers for airlines, previously said it was lead reinsurer for Malaysia Airlines. Heidi Polke-Markmann, an Allianz spokeswoman, said Monday that Allianz was also the lead AirAsia reinsurer.

Ms. Polke-Markmann said it was too early to discuss the facts of the AirAsia case. Allianz does not disclose the details of its potential liability nor other confidential information regarding its reinsurance activities, she said.

She referred to a company statement that "our thoughts and prayers are with all those affected by this missing flight," adding: "We stand by to support our client as fully and quickly as possible, working in conjunction with the insurance broker and our co- reinsurers."

JLT Group, the London insurance broker, confirmed that it had acted for AirAsia, and that it was "providing every assistance as is appropriate in these distressing circumstances." It declined to comment further.

This has not been a particularly good year for air safety. The Aviation Safety Network, a private organization that tracks accidents and safety issues, said that 526 lives had been lost this year in accidents involving 19 commercial airliners carrying at least 14 passengers. …

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