D. Aviation risks
The Group underwrites a direct and facultative reinsurance account domiciled in most parts of the world. The portfolio is made up of the following classes with maximum lines.
Aviation classes
|
2008 Gross premium £m |
Current maximum line size £m |
2008 Average line size £m |
|
|
Airline (hull & liability) |
17 | 84 | 14.0 |
|
General aviation (hull & liability) |
14 | 57 | 9.8 |
|
Airports liability |
13 | 57 | 25.8 |
|
Products |
7 | 57 | 16.4 |
|
Space (hull & liability) |
6 | 46 | 6.9 |
Notes:
- Limits are set in US dollars converted at a rate of £1 = US$1.5 and therefore currency rate of exchange changes may increase or reduce the sterling limits.
- Maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda Ltd.
- Premium are stated gross of acquisition costs.
The airline account is exposed to large claims arising from property damage, death or injury arising from aircraft accidents. The domicile of the airline and passengers has a notable influence on the cost of claims, for example US court awards are generally higher.
The general aviation account covers smaller aircraft or cargo and covers owners or operators, against loss or damage and third party injury. The risk excess account is a book of general aviation reinsurance business written to protect a small number of insurers against large general aviation claims.
Airport liability insurance covers airport operators, refuellers and air traffic controllers against losses arising from injury caused by their activities or occurring on their premises. Product liability covers manufacturers against accidents arising from faulty parts or equipment, or poor servicing of aircraft. Both airport and product liability coverage is written on a losses occurring basis meaning that claims advices can be made after the policy has expired. Space insurance covers property and liability during launch and the operation of satellites whilst in orbit for a limited period, normally of one year.
The aviation account is subject to both small and large claims. Claims involving loss of life or serious injury to high earning passengers or third parties are subject to the ongoing inflation of court awards particularly in the USA. Large accidents involving the potential death of 500 or more passengers are feasible and could potentially result in a gross claim to the business of more than $175 million before reinsurance if, for example, two large aircraft were to collide. Space losses are generally large single claim amounts caused by launch failure or operational failure in orbit. The principal Aviation accounts are protected by a reinsurance programme on both a risk sharing (proportional) and excess of loss basis. The Group reinsurance arrangements are discussed below. The space account is written with risks shared with Amlin Bermuda but is not protected by excess of loss reinsurance.
The geographical spread of Aviation classes is shown below:
