Only 3% coverage of MAS by local insurers

PETALING JAYA: Domestic insurance companies that are part of the aviation insurance pool for Malaysia Airlines' fleet, which includes MH370, retains only 3% of the risk of the aviation hull and liability policy.
President and CEO of Malaysian Reinsurance Bhd (Malaysian Re) Hashim Harun said the amount covered is small and shared among the pool members and therefore does not pose a risk to domestic players.
"The aviation pool takes only 3% of the total coverage. The rest is insured outside," he told SunBiz yesterday.
Hashim said under the risk pool system, insurance companies come together to form a pool which limits the exposure of the said companies to catastrophic risks such as floods, earthquakes and in this case, a missing plane.
He also confirmed a SunBiz report that Malaysian Re is one of the insurers in the risk pool.
"We share a very small portion of the risk," said Hashim, without disclosing the amount covered.
The aviation hull and liability policy for flight MH370 is underwritten 100% by Etiqa Insurance and Takaful Bhd, with the majority of the risk ceded to a global panel of reinsurers led by Allianz Global Corporate & Specialty SE (AGCS SE), a specialist reinsurance company.
Unconfirmed reports suggest that Etiqa, a unit of Malayan Banking Bhd, retains only around 4.5% of the risk, reinsuring the remainder with the international marketplace.
Etiqa did not respond to a request for comments as at press time.
Hashim also disclosed that Malaysian Re, due to voluntary cession arrangements, also has personal accident (PA) insurance coverage for some passengers who may have perished on board the ill-fated flight.
Under the existing voluntary cessions market agreement, all local general insurance companies are required to cede a portion of their business to Malaysian Re. It also has voluntary cession on motor insurance as well.
"It is a small amount of about 2.5%. It (personal accident insurance) won't be more than RM500,000," he said.
Hashim explained that its total exposure to MH370 is not expected to have a negative impact on its earnings because of the small share of the risk.
He said that its claims exposure pertaining to the missing plane is likely to be manageable because its exposure is capped by its retrocession programme.
Hashim also confirmed that no insurance payments has been made to the passengers' next-of-kin, but the insurance pool has started to make payments into an escrow account.
"We have already started paying out a cash call," he said.
He reiterated that the payment was not for MAS but for related expenses such as payment to loss adjusters and others.
MAS has provided an initial financial assistance of US$5,000 (RM17,700) per passenger to the next-of-kin of passengers of flight MH370.
SunBiz reported on Tuesday that MAS has yet to receive any monies from insurers for the loss of its aircraft but had made payments to families of the missing aircraft's passengers out of its own coffers.
So far, Allianz Malaysia Bhd has disclosed that four passengers on board the flight are its customers while Lonpac Insurance Bhd has personal accident insurance cover on three passengers.
Shares of MAS were actively traded yesterday, while its share price fell 0.5 sen to close at 23 sen, after the government had announced that the missing flight MH370 ended in the Indian Ocean.
At the closing bell yesterday, MAS' share price was 2.13% lower than its closing price of 23.5 sen on Monday.
MAS was the fourth most active stock yesterday, with some 95.21 million shares changing hand.