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Session 2: The true value of airline insurance

This session aimed to convey an understanding of the insurance product, the real value of insurance, the capital needed to cover huge liabilities and what it takes to create a sustainable insurance market for the benefit of the airlines industry.

In his speech the moderator, David Gasson, Secretary General, International Union of Insurers mentioned that, the current issues for airline insurance are: EC Com (2002) 521 Insurance requirements for air carriers and aircraft operators, and the modernization of the Rome Convention (Third Party Legal Liability) (1952).

Jacques Mercier, Managing Director of Allianz, used the following graph to present that net premiums exceeded the incurred losses in 2003 for the first time since 1998.

Worldwide Cumulative Net Premiums & Losses (m US$)

He also, added that there has been a significant increase on the average cost per passenger, in the seven years. This average cost has increased by 300 percent , in Africa, by 140percent in Central and South America, by 250percent in Asia, by 190percent in North America and by 700percent in Europe. He estimates that this trend will continue in the future because of the new liability regimes adopted worldwide (such as IATA Intercarrier Agreement, Montreal Convention and the “domicile” jurisdiction, EU Regulations and Proposed revised Rome Convention) and the increasingly common practice of code share.

He concluded that

  • Volatility of Losses is expected to continue and might increase

  • Volatility of Premiums is no longer acceptable and needs to be addressed

  • Volatility of Balance is a direct consequence of volatility of Premium