747 Crashes May Boost Insurance Rates for Airliners
The second crash of a Boeing 747 in two months may force up the price of insuring international airliners, a spokesman for Lloyd’s of London said Tuesday.
He said that the effect on insurance premiums of the Japan Air Lines crash Monday, in which 520 people died, will be better known when Lloyd’s, a wide-ranging concern that acts as the world’s biggest insurance marketplace, announces figures for its aviation business next month.
The crash of the JAL plane, on a domestic flight from Tokyo to Osaka, was by far the worst accident involving a single airliner in aviation history. Only four survivors were found among the 524 passengers and crew members.
Air-India Crash
After the crash of an Air-India Boeing 747 southwest of Ireland in June, in which 329 people died, Lloyd’s officials estimated that insurers might face the largest claim in aviation history--as much as $100 million--for loss of life and replacement of the aircraft.
The Lloyd’s spokesman said the Japan Air Lines plane had been valued for insurance purposes at $35 million. Under Japanese law, he added, there is no limit on the amount of life insurance that can be paid to survivors of passengers traveling on domestic flights.
The primary insurer for the JAL plane was Tokyo Marine and Fire, and 57% of that was reinsured at Lloyd’s.
Compulsory insurance for passengers on international flights in currently fixed at a maximum of $75,000. Relatives of crash victims may sue carriers in the courts for higher settlements.
The Lloyd’s spokesman said that insurance rates for airliners vary according to the plane involved and the carrier’s safety record.
Recurring Defect
If investigators determine that a crashed airliner had developed a possibly recurring fault, then rates are likely to rise accordingly. If a crash were caused by a non-recurring factor, rates are less likely to be affected.
Specialists examining the flight recorders of the Air-India plane have yet to determine whether the crash was caused by a mechanical failure or by a bomb placed in the hold.
Until these two recent crashes, the largest single settlement for the replacement of an aircraft was $35 million paid for the hull of the Korean Air Lines Boeing 747 shot down by the Soviet Union in 1983.
