Malaysia Airlines will likely not have to wait to be compensated by insurers for the value of the Boeing 777-200 despite the mystery of the missing flight MH370, says Flightglobal’s Ascend safety and insurance director Paul Hayes.

Modern underwriting policies for commercial aircraft generally include a clause that obligates insurers to pay as soon as 48h of an aircraft reported missing, Hayes says.

Malaysia Airlines declared MH370 missing with 227 passengers and 12 crew around 07:30 on 8 March in Beijing, or about 7h after it took off from Kuala Lumpur.

The fact that the aircraft is still unaccounted for is also covered in standard insurance policies, Hayes says.

Most airlines generally buy two forms of insurance for each aircraft, he explains. The first is a hull and legal liability policy, he says. Such agreements provide “all risk” coverage, but usually have clauses exempting damage or loss of the aircraft due to acts of violence, he says.

So airlines usually also cover the aircraft with “war risk” coverage, which compensates for damages caused by hijacking, terrorism or military action, Hayes says.

If it’s not clear how the aircraft was lost, there’s often an insurance clause that makes sure the airline still gets compensated on time, he says.

The underwriters of the all risk and war risk policies each agree to cover half the cost, with the balance reimbursed if or when the mystery of the aircraft’s disappearance is solved, Hayes says.

In the short-term, Malaysia Airlines may face higher insurance premiums due to the hull loss, Hayes adds.

But insurance premiums for the airline industry in general are not likely to be affected by MH370’s disappearance, he says.

“I wouldn’t expect this to have a major impact on pricing,” he says.

Source: Cirium Dashboard