The loss of Air France Flight 447 off the coast of Brazil could have a hardening effect on aviation insurance rates, an aviation insurance expert said, but the full impact probably won't be known until year's end.
Magnus Allan, Aon Aviation Analyst in London for the Chicago-based insurance broker, said the latest air disaster could push "hard market sentiment further" and will probably produce some "very, very difficult negotiations" at year-end renewal time.
While the aviation insurance market has seen single-digit hardening through this year, that trend will clearly continue when 60 percent of the airline market, a significant portion of which is in North America, comes up for November and December renewals, he said.
Mr. Allan said the aviation market has seen softening prices over the past few years. With the onset of the economic crisis and increased number of losses through this year, the market needs to increase premium in the face of a couple of unprofitable years, he noted.
Capacity, however, remains abundant, he said, but the only question for now is whether the increases will remain at the single-digit level or rise 10 percent or more.
The loss of the Airbus 330-200 would not have an effect in underwriting fleets that are dominated by planes manufactured by either Airbus or Boeing, the two major airplane manufacturers, he observed, saying both have excellent safety records.
There were a total of 228 passenger and crew lost in the Air France crash. The latest reports suggest the plane may have come apart in the air as it ran into a torrent of thunderstorms and high winds that some estimate may have reached hurricane level.
According to sources, the lead insurer for the aircraft was French-based AXA Corp.
Air France held an inter-religious prayer service today in Paris for the family and friends of the victims of Flight 447.
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