Etiqa is lead local insurer for MAS

PETALING JAYA: Etiqa Insurance & Takaful Bhd, the insurance unit of Malayan Banking Bhd (Maybank), is said to be the leading local insurer covering Malaysian Airline System Bhd's (MAS) fleet of aircraft, including the still-missing Boeing 777-200ER jet.
SunBiz was given to understand that Etiqa along with several Malaysian insurer and reinsurers are involved in insuring the aircraft, which is now the object of a major search and rescue operation by 10 countries.
Industry sources say reinsurer Malaysian Reinsurance Bhd (Malaysian Re), a unit of MNRB Holdings Bhd, is one of the local players exposed to the risk.
It was reported that Germany's Allianz is the lead insurer covering the jet that disappeared over the Pacific Ocean, while Willis is its broker.
Since no single insurer has the resources to take on a substantial portion of the risk associated with a major airline, let alone all the risk associated, therefore aviation insurance is typically sold to a syndicate of insurers with one taking the lead and several other companies sharing the rest.
"Etiqa is the lead local underwriter covering MAS. Etiqa together with a small number of other local insurers provides the cover," the source told SunBiz yesterday.
However, he said, total exposure by Etiqa and the other local insurance players collectively is minimal and would not affect them significantly.
Etiqa also provides travel insurance and medical assistance to MAS passengers. It won a five year contract in late 2012 together with Cover-More Group, a leading travel insurance and assistance company.
Etiqa, Malaysian Re and MAS did not respond to queries sent via-email, as at press time.
It is learnt each insurer involved, including Etiqa, has made provision for any loss arising from the jet disappearance. The amount of provision made by Etiqa for the expected claim could not be immediately determined.
"Etiqa is currently awaiting data to estimate the company's risk exposure in the disaster," the source said.
Allianz as the lead insurer has the largest portion of the risk.
Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability.
It is considered a specialised class of business and in Malaysia's case, it is insured or reinsured in international markets such as the London insurance market where the market is made up of the traditional Lloyd's of London syndicates and numerous other traditional insurance markets.
The source said it could take months to determine who is at fault for the missing MH370 jet let alone settling the claims.
Commercial airlines carry between US$1 billion and US$2 billion per plane in liability insurance. The list price for a Boeing 777-200ER aircraft is US$261.5 million.
The source said while it is true that premium rates could go up in the case of a mishap, this may not be the case for MAS which has a good track record thus far. This assumption is made in the instance that the aircraft which is currently missing, is found to have crashed.
"Rates for airline insurance coverage has been soft. There is plenty capacity, high levels of competition and limited loss activity. Hence, due to demand and supply principle, insurers' desire to participate (in insuring) airlines," the source said.
It is learnt that the quantum of payment made by airlines to crash victims vary, with the sum widely depending on the nature of their injuries, their personal circumstances, and the state or federal laws or international treaties that govern the flight.
Under the Montreal Convention, which governs claims arising from disasters on international flights, passengers are automatically entitled to any proven damages up to a fixed amount. The Montreal treaty determines only how much carriers, not other defendants, pay.