Ian Sheppard has acted as Editor International Show Editions for AIN since June 2013. Based in the Redhill, England, Ian reports for the various AIN publications as well as providing support to International Editor Charles Alcock in covering international air shows (such as Farnborough, Paris, Singapore and Dubai), and the EBACE and MEBA business aviation events. His central role is to cover Europe, the Middle East and Africa (EMEA).
Prior to becoming more involved with AIN in mid-2011 (initially as deputy international editor), Ian worked for various aviation publications through his company, First Aerospace Media. This included being part of the AIN team covering daily news at international air shows.
Ian has worked for publications such as Flight International (technical reporter, 1997-8) and Aerospace International (editor, 1999-2000). He was publications manager at Airclaims (Ascend) between 2000 and 2004 before forming First Aerospace Media. Since mid-2009 Ian has also been managing editor of Regional International, the journal of the European Regions Airline Association (ERA).
Ian hasis working towards a European commercial pilot licence, having held an FAA private pilot license in 1991, and instructor rating. He also has a degree in aeronautical engineering from the University of Bath, England, and a graduate diploma in law from Kingston University, and is a graduate of the legal practice course (College of Law, Guildford).

Editor

Ian Sheppard

In the wake of recent airliner losses, carriers are bracing for substantial increases in insurance premiums when the main renewals season starts on November 1. Insurers have already made massive payouts for hull losses following the disappearance of Malaysia Airlines flight <a href="http://www.ainonline.com/aviation-news/ain-air-transport-perspective/2014-05-27/malaysia-releases-satellite-data-missing-flight-370">MH370</a> en route to Beijing and the apparent shooting down of <a href="http://www.ainonline.com/aviation-news/ain-air-transport-perspective/2014-07-23/ain-blog-mh17-insurer-pledges-payments-liability-questions-loom">MH17</a> over eastern Ukraine. Other recent losses have included the crash of Air Algerie’s flight AH5017 in southern Mali and <a href="http://www.ainonline.com/aviation-news/2014-07-23/transasia-atr-crashes-taiwan-48-dead">TransAsia Airways</a> flight GE222 in Taiwan. Further unsettling the risk environment for air transport have been recent attacks on airports in Pakistan, Israel, Afghanistan and Libya.


After the 9/11 attacks in the U.S., insurance premiums went up four-fold. Today, market consensus seems to be that this time the industry could see a three-fold increase for war risk insurance, which is a separate market from hull coverage that faces losses of $600 million (and increasing) this year against just $60- to $80 million income from premiums. Recent years have been the safest ever for the world’s air transport sector and for the aviation insurance industry this has driven up capacity and competition, leading to a “soft” but profitable market in insuring the risks.


One aviation loss adjuster, speaking to AIN on condition of anonymity, said that recent events could in fact have a good outcome for the “core” aviation insurers as players looking to profit from the high safety levels lose their cool. But another insurance industry source disagreed, reasoning that higher premiums could attract other players to the market. Phil Seymour, CEO of UK-based consultancy the International Bureau of Aviation, reflected that the MH17 loss and the recent airport attacks have “highlighted the attraction of aircraft and airport infrastructure to warlords…[and] put aviation back on the ‘higher risk’ platform.”


According to Philip Smaje, global head of transportation brokering and chief executive of aerospace for broker Willis, airlines will be quoted on a case-by-case basis, and those perceived to be riskier will see the highest increases. Willis is the insurance broker for Malaysia Airlines and also arranged hull cover for Air Algerie. The Malaysia Airlines policy reportedly has a limit per loss of $2.25 billion but without a cap on search-and-rescue costs that the insurers may have to cover for MH370—meaning that they will not necessarily be able to rely on governments to foot the bill.


Saleema Brohi, aviation partner with London-based law firm Hill Dickinson, confirmed that most policies now include a limit on cover for search-and-rescue costs, and that this can leave carriers shouldering costs that governments decline to absorb. However, she added that laws on search-and-rescue responsibilities around the world remain vague, leaving it unclear how exactly the costs might be apportioned in any given case.


Smaje said that with the mismatch between war risk payouts and premiums, “there has to be an adjustment in the market…we’re expecting something in the order of 300 percent…and those carriers that have had losses could see more penal [levels].” In the hull and liability market he expects “some adjustment” but suggested that there is a “split market” as some insurers are facing double losses attributable to their exposure to two or more accidents. But Smaje also said that with negotiations for the renewals season not starting until next month, “it’s too early to say” what premiums will be. He added that “we shouldn’t lose sight of the fact that it has been a safe industry for a long time.”


Reinsurance


Lloyd’s Syndicate 609, managed by London-based Atrium Underwriters, was the lead underwriter for the Malaysia Airlines hull war policy activated by MH17. A Lloyds spokesman told AIN, “In the current circumstances aviation and war risks are not issues we’re providing commentary on.” In a statement on July 19, only two days after the MH17 loss, Atrium CEO Richard Harries said it had agreed to settle the hull war loss portion of the loss, which some estimate at almost $100 million. Harries stated, “Atrium and its co-insurers have been working with the brokers Willis, lawyers DLA Piper and loss adjusters Charles Taylor Aviation and have agreed to settle the hull war aspect of the loss today. This is on the basis that the early assumption regarding the key facts remain correct [that the Boeing 777 was shot down by Russia-backed separatists]. Collection of funds and preparation of settlement documents has been instigated.” It is normal practice, particularly since 9/11, to reinsure exposure so the losses are likely to be well spread across the market.


Allianz is the lead hull and liability reinsurer for MH370, and that Boeing 777 has been valued at about $97 million. “As the leading reinsurer of Malaysia Airlines for aviation hull and liability coverage, Allianz Global Corporate &amp; Specialty stands by to support our client as fully and quickly as possible,” said a spokeswoman for the company. As lead reinsurer, it would likely have had 15 percent of the exposure, one industry source suggested.


On the legal side of the fence, the spokeswoman told AIN that insurance payments to passengers or their families covered by the Montreal Convention are generally made quite quickly these days, but finally resolving each case can take a lot of time. “Even in Convention claims,” she explained, “claimant lawyers will often be inventive and seek ways to circumvent the Convention to obtain higher damages for their clients.”

Airline War Risk Insurance Premiums To Sky Rocket

Airlines face a tripling of war-risk insurance premiums after recent events, including the shooting down of MH17 in Ukraine.

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