Underwriters in the aviation war and all risks insurance market are anticipating a complicated claims settlement process after a Ukrainian jet yesterday crashed in Iran, The Insurance Insider understands.
Market sources speaking to this publication said it remained unclear whether hull costs from the disaster would fall on the airline’s aviation all risks policy, or if they would be covered by the airline’s war insurance policy.
Concerns over the availability of information needed to settle a potential claim have arisen after the Iranian government Wednesday said it would not hand over the aircraft’s black box.
In previous claims the failure to recover or access information contained within the black box of an aircraft has led to the invocation of a ’50-50’ clause, meaning payment for cost of the hull may be equally split between an airline’s all risks and war insurers.
A so-called 50-50 clause is an agreement between an airline’s hull insurer and hull war insurer agreeing to pay half on any claim where the cause of the loss, war or non-war, is unclear.
The clause allows an insured to be paid out before a cause is determined and permits the carriers on risk to then decide how payment should be split.
Multiple sources cited the case of Malaysia Airlines Flight MH370 which disappeared over the Indian Ocean in 2014, sparking a protracted claims process that concluded only in June last year.
After an initial deal to split the hull cost of the MH370 jet equally between the airline’s all risks and hull war insurers, agreement over the final payment went to arbitration.
The arbitration process, which concluded at the beginning of June, found that the airline’s war insurers – led by Atrium – should pay out.
Malaysia’s lead all risk insurer AGCS and hull war insurer Atrium were unable to strike an initial agreement because the black box of the jet was never recovered.
The Insurance Insider yesterday revealed that Tokio Marine Kiln is the lead insurer on the war insurance policy of Ukrainian International Airlines (UIA).
Meanwhile, the New York-headquartered aviation specialist Global Aerospace is understood to lead the airline’s aviation all risks policy.
Market sources speaking to this publication said that cover for the airline was provided as part of a programme placed for its parent Fin Group.
The broker for the placement is AJ Gallagher.
Concerns over the nature of the claim have arisen as a picture emerges suggesting external factors may have been involved in bringing down the aircraft.
Speaking to this publication an insurance market source said they had received separate confirmation of the jet being hit by a surface to air missile, citing security sources.
US officials Thursday said they believed the commercial aircraft had been shot down shortly after take-off, adding that the plane was being tracked by Iranian radar before two missiles were fired.
UK intelligence sources have also seen evidence the plane may have been hit by an Iranian air defence missile, according to media reports.
TMK declined to comment.
Global Aerospace, AJ Gallagher and Ukrainian International Airlines did not respond to a request for comment.