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The Insurer In Full: Liberty leads AJG-placed Indonesia Sriwijaya Air Boeing cover

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Topics: Aerospace Claims & Losses

Liberty is the lead carrier on the Boeing 737-500 passenger plane carrying 62 people that crashed into the Java sea shortly after take-off on Saturday, The Insurer understands...

Sources have suggested to this publication that the hull of the 26-year-old Boeing 737-500 is insured for a modest $3mn, with liability losses also expected to arise.

 

The aircraft was carrying 50 passengers and 12 crew.

 

Any losses to fall on the aviation insurance market as a result of the missing aircraft will fall on the 2020 year of account, with Sriwijaya Air renewing at 1 July, sources have indicated to The Insurer.

The Sriwijaya Air plane lost contact four minutes into its journey which departed Jakarta’s international airport enroute to Pontianak in West Kalimantan province.

Debris of the aircraft has been found in the sea north of Jakarta. The Indonesian navy has released footage of divers searching through the wreckage of the passenger plane as the hunt for its black boxes continues.

The Sriwijaya Air crash marks the latest aviation loss incident for Boeing, following the 2018-19 Lion Air and Ethiopian Airlines crashes, which led to the global grounding of the world’s Boeing 737 Max fleet in March 2019 – and what has more recently become the largest single-account aviation loss since 9/11.

As reported by this publication in October, shortly after extending Boeing’s multi-year programme, Marsh – which places Boeing’s $2.25bn manufacturers’ policy – communicated to lead carrier Global Aerospace and following markets/reinsurers that the company’s share of the Ethiopian Airlines loss had spiralled from $350mn to $990mn.

Earlier this week, US aerospace manufacturer Boeing entered into an agreement with the US Department of Justice to pay $2.5bn to resolve a conspiracy to defraud criminal charge.

The total includes a $500mn fund to compensate heirs and relatives of victims of the Boeing 737 Max crashes of Lion Air flight 610 in 2018 and Ethiopian Airlines flight 302 in 2019.

Within the $2.5bn penalty, Boeing will also provide $1.77bn of compensation payments to 737 Max airline customers as well as a criminal monetary penalty of $243.6mn.

Liberty and Arthur J Gallagher did not immediately respond to a request to comment by this publication.

The Insurer comment:

The year begins with a tragic air disaster. The plane’s age and location means it will not be a major loss in airline insurance terms. However, will the recent hefty 737 Max awards – which involved another Indonesian carrier (Lion Air) – have an inflationary impact on the liability quantum?

 

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