Yesterday’s crash of an American Airlines A-300-600 into a residential neighborhood in Queens is likely to result in claims totaling between $600 and $800 million according to preliminary estimates.
While it’s still too early to determine the cause of the crash, and the number of people who died on the ground when it came down in Far Rockaway, investigators have so far found no indications that terrorism was involved. If that assessment is confirmed, full liability for the compensation to the families of the passengers and other victims will be born by private insurers.
American Airlines indicated that the aircraft itself carried hull insurance of around $80 million, and that other liabilities up to $1.5 billion were covered by its insurance policies.
London’s Financial Times reported that Robert Hartwig, chief economist of the Insurance Information Institute, had estimated that recoveries on the liability policies would fall between $1.5 and $2.25 million per victim, based on the average recovery for similar events in the U.S. Losses involving U.S. citizens are normally compensated at the higher end, Hartwig indicated. As the plane was bound for the Dominican Republic, many victims may not have been Americans. Miraculously there appears to be far fewer victims on the ground than originally feared. New York’s mayor, Rudolph Giuliani, indicated that six to eight people had so far been reported missing, but that number could rise as investigators explore the devastated area.
Early estimates indicated that Lloyd’s would probably receive claims of around $100 million. Lloyd’s issued a brief statement acknowledging that it “has some involvement in the insurance of American Airlines,” but said it couldn’t comment further at this early stage. Australia’s QBE, which is heavily involved in the London market, also acknowledged that it had some exposure, which it preliminarily estimated at $2 million net of reinsurance.
The lead insurer of American Airlines is Global Aerospace, an agency jointly owned by U.K. insurers Royal & Sun Alliance and CGNU. Other participants include Munich Re, Chubb Corp. and Tokio Marine.
AXA and Swiss Re also have some exposure.
While the loss bears no comparison to the claims following the attacks of Sept. 11, it’s nonetheless an additional disaster both for the insurance and the airline industry, and comes at an especially difficult time for Lloyd’s, as the audit of its reinsurance liabilities by the NAIC was scheduled to begin this week.
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