No insurance payout yet, says MAS

PETALING JAYA: Malaysian Airline System Bhd (MAS) has yet to receive any monies from insurers for the loss of its aircraft but confirms that its made payments to families of the missing airliner's passengers.
"Malaysia Airlines confirms that payments were made to next-of-kins of passengers onboard MH370 to meet immediate financial hardship. However, no payment has been made to MAS for the loss of the aircraft," it told Sunbiz via email yesterday.
The national carrier, which has insured its fleet of aircraft with Etiqa Insurance & Takaful Bhd, denied a foreign news report which stated that it has already been handed US$110 million by insurers over the loss of its missing Boeing 777 on flight MH370.
The report also stated that Allianz Global Corporate & Specialty, the lead reinsurer for the ill-fated aircraft, has paid the insurance money into an escrow account.
However, MAS confirms that the money paid to next-of-kins of passengers are from its own coffers and not from insurance claims.
"At this stage the payment has been made by MAS," said MAS. It however could not confirm the amount paid out.
Etiqa and Allianz SE both declined to comment when asked if any insurance payout has been made so far. Both companies had asked to refer the question to MAS instead.
Last week, Manuel Bauer, a member of the board at Allianz SE, could not confirm if any payments were made to MAS.
"I cannot confirm any payments we have made or will make to MAS at this point. We have a confidentiality towards MAS," Bauer, who is responsible for insurance growth markets at the Germany-based insurance giant, told SunBiz recently.
According to Bauer, under normal circumstance when a plane goes missing, the reinsurers involved will put a deposit into an escrow account to pay for miscellanoues items such as legal and loss adjusters.
He emphasised that the money from the escrow account does not go directly to the passengers nor the carrier insured.
It was reported that the Chinese government has been pushing their domestic insurers to fast-track compensation to relatives of the missing passengers.
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 reinsured or ceded 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.
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.
MAS is facing a huge claim for the loss of the aircraft if the disaster is found to be a result of error by the airline or shortcomings in its security procedures, for example.
With the likelihood of heavy payouts by insurers and airlines increasing, insurance stocks have taken a beating since news of their involvement in the coverage of MH370 was reported.
MAS shares' closed down 0.5 sen or 2.08% to close trading yesterday at 23.5 sen.
Last night, Prime Minister Najib Tun Razak announced that following new analysis of satellite data, MH370 ended in the southern Indian Ocean.