Future operators of the Airbus A380 are starting negotiations with aviation insurers to find inexpensive ways to raise the current passenger liability cover limit to $3 billion, rather than risk being forced to pay out in the event of a fatal accident.

Combined loss-of-life claims resulting from a major disaster involving an A380 carrying 450-650 passengers could exceed the current maximum $2 billion pay-out offered by insurers, airlines fear.

Despite the fact that the $2 billion maximum loss limit has only been reached after two events - the 1988 bombing of the Pan Am Boeing 747-100 over Lockerbie, UK, and the US terrorist attacks of 11 September 2001 - carriers with the new Airbus on order are starting negotiations to raise the insurable total loss limit to at least $3 billion.

Steve Doyle, manager, aviation and aerospace at insurance broker Aon, is confident that the extra billion dollars of cover will be provided by traditional aviation liability insurers. "Compared with today's largest aircraft, the 747-400, the A380 only represents a 20-30% higher exposure, so I think the market generally feels it can deal with it," he says.

However, the A380's low seat/km operating costs were one of the main reasons behind the launch customers' decision to buy the aircraft, and Doyle says that if a "cost-effective" offer is not found, airlines have indicated that they are willing to look outside the traditional aviation market.

Launch customer Singapore Airlines is understood to have put its feelers out in the market, as its mid-2006 entry-into-service will be the first. Doyle says that as each airline assesses its requirements and the perceived likelihood of total loss and associated liability claims, the demand for new $3 billion policies will become clearer. "Serious negotiation for A380 cover [for most operators] will start in the third and fourth quarter, as policies would not even start until November for June 2006 operation," says Doyle.

Other early A380 customers include Qantas and Emirates, which will introduce aircraft in October and November 2006.


Source: Flight International