The discovery of two bombs destined for Chicago from Yemen, but intercepted on cargo planes in Dubai and Britain, will not have a huge impact on the global aviation market, but the event has spurred discussion about supply chain risk assessments.
"There was not an actual loss," said Garrett Hanrahan, chief executive officer of Willis Global Aviation the Americas, as he began to explain the potential market impact. "Also, there is a lot of capacity in the market and that is going to temper underwriters even if they have a desire to move rates up."
According to the latest reports, there almost was a loss involved with the incident. Various outlets have reported that France's Interior Minister Brice Hortefeux said one of the bombs was defused a mere 17 minutes before it was scheduled to go off.
Claire Wilkinson, vice president of global issues for the Insurance Information Institute in New York, said the two bombs found on cargo planes headed to the United States are "the latest reminder that terrorists continue to target us."
I.I.I. released a paper in April that said recent terrorist plots, although thwarted, indicate the risk of terrorism is a "constant, growing threat," said Ms. Wilkinson.
Not all aviation insurance needs are met by the commercial insurance market. Airlines are required to have passenger and third-party liability insurance coverage to get landing rights and leases, but after Sept. 11, 2001 no carrier would write coverage for acts of war, terrorism and related perils.
To fill the void, the Federal Aviation Administration Insurance Program stepped in to cover the risk to U.S. airlines. It insures war risk hull loss, passenger liability and third-party liability.
The program has been extended several times and is currently effective until the end of 2013, according to the FAA website.
Of the risk insured on the open market, Mr. Hanrahan said he sees no change to the rates at fourth-quarter renewals due to the recent bombs found in Dubai and Britain.
Bruce S. Fine, U.S. aviation practice leader for Marsh Inc. in Chicago, said the market is aware the "threat is out there" and this incident is "consistent with threats that are undertaken to insure."
"That doesn't mean people won't talk," Mr. Hanrahan added.
"It may get people to look differently at the potential for risk–one more thing on the radar screen," he said.
The incident may also get clients talking about supply chain risk assessments, according to Ben Tucker, senior vice president in Marsh's property specialized risk group in New York.
"Could events like this result in disruptions in timing or delivery if portions of the chain are interrupted?" he asked. "Then you have to assess whether that would affect business in the United States."
The International Air Transport Association has admitted that although cargo security is better than in 2001, "there is room for improvement," said Giovanni Bisignani, IATA director general.
Recognizing that air freight is integral for the world's economy, Mr. Bisignani said the IATA is planning a global effort to modernize the 40-year-old airport screening process.
"Defining coordinated security responses with collaboration between industry and government has made more progress in the last 10 months than at any time since the tragic events of 2001," he said in a statement.
"Governments and industry are now aligned with a common goal. We must use this momentum to move from words and agreements to actions and results," the statement continued.
In a recent report, Aon Analytics said there continues to be plenty of capacity for larger jets in the general aviation, which is driving competition to hold prices down.
"After three years of soft market conditions, however, the question is how much further insurance prices in the corporate aviation subsector can fall before it ceases to be viable for underwriters to participate," Aon said.
Commercial aviation is holding steady at the moment, with a majority of insurance being renewed at the same price as last year.
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