No rating changes expected in wake of Malaysia Airlines crash

A.M. Best reports in a new briefing that the total insurance loss of Malaysia Airlines Flight MH-17 is not expected to result in any ratings actions.

In issuing the briefing Wednesday, A.M. Best reports it believes the majority of the loss will be absorbed by the Lloyd’s market, as well as a number of global insurers and reinsurers. “Given the diversified nature of business underwritten by these entities, A.M. Best does not expect to take any rating actions in response to this single large loss,” notes a company statement.

Malaysia Airlines Flight MH-17 crashed over the Ukraine-Russia border on July 17, 2014.

A.M. Best notes the total insurance loss will comprise passenger liability claims and physical damage to the aircraft, with liability loss being shared between the insurance and reinsurance markets.

Allianz SE is the lead reinsurer on aviation hull and liability risks for Malaysia Airlines, with the Lloyd’s market also likely to be affected by passenger liability claims (as will a number of global reinsurers), notes the A.M. Best statement.

“Due to the nature of the loss, a complex and lengthy settlement period is anticipated,” the statement adds.

Lloyd’s Syndicate 609, which is managed by Atrium Underwriters Ltd., has
confirmed it is the leader of the hull war policy for Malaysia Airlines. The syndicate and its co-insurers have agreed to settle the hull war aspect of the loss and collection of funds has been instigated (subject to key facts remaining correct), A.M. Best adds.

“For a number of years, abundant capacity has placed considerable pressure on pricing, as well as terms and conditions, across all aviation lines,” says Catherine Thomas, director of analytics and an author of the briefing. “For the niche war risk market, losses this year will considerably outweigh premiums written and insurers are expected to react with substantial rate increases,” Thomas adds. 

Image: People walk amongst the debris, at the crash site of a passenger plane near the village of Grabovo, Ukraine, Thursday, July 17, 2014. (AP Photo/Dmitry Lovetsky)