The COVID-19 pandemic has caused more than US$160 billion in insured value of aircraft to be grounded, leading to huge risks for insurers, according to a report by global brokerage Gallagher.
Singapore has the largest number of idle planes at 205, with Hong Kong coming in second at 178. Madrid has 158 planes, while New York, which has one of the world’s busiest airports, only has 40, Reuters reported.
Flights have been cancelled all over the world and airlines’ revenues have taken a massive hit as governments institute lockdowns to stem the spread of the coronavirus.
“There will be airline failures, meaning unpaid premiums and bad debt,” Bruce Carman, chief underwriting officer at Hive Aero, was quoted as saying by the report. Carman added that airlines are likely to seek refunds of their premiums due to the huge drop in passenger numbers.
Large numbers of grounded aircraft pose risks for so-called “aviation war” underwriters, the report said, as they present a larger target for terror attacks.
Leaders of aviation insurance consortiums have turned down some renewal business, especially fleets with non-Western built aircraft and older planes.
According to Gallagher, insurers are seeking rate increases of between 20% and 25%. In recent years, aviation insurance rates have been declining due to an improving aircraft safety record and steep competition in the market.
