Friday, April 16, 2010

Iceland: "Volcano Insurance, Anyone?"

Following up on Insurance: "Iceland Volcano Eruption Could Mean Business and Catastrophe Claims ".
From the Wall Street Journal (Europe) The Source blog:

Don’t be surprised if European insurers introduce new volcano-related insurance coverage for the airline industry in the coming weeks.

Why? Because, apparently, there’s currently none.

And contrary to popular belief, Europe does have its own set of dangerous volcanoes.

With the decision of countries like the U.K., France, Germany, Ireland, Belgium, the Netherlands and Scandinavia to shut down airports because of the recent volcanic eruption in Iceland, many would think that some type of catastrophe or revenue-loss insurance claim on the part of airlines is in order.

But that’s not the case, according to several insurance companies contacted by Dow Jones Newswires today.

Aviation insurance typically covers physical damage to planes, and so far, no airplane has been damaged by the ash spewed by the volcano under Iceland’s Eyjafjallajokull glacier.

A spokesman for Allianz SE’s industrial insurance business said:

From the current perspective, we don’t see any impact from the volcanic ash. A business interruption or delayed delivery to industrial companies would have to be caused by materials damage, which isn’t the case here.

“The way the airlines are treating this is very much like a weather delay such as a severe snowstorm or an ice storm,” said Robert Hartwig, president of the New York-based Insurance Information Institute, which provides data to better understand insurance issues.

“Even though the event is going to be very, very expensive, costing billions in terms of economic losses, it’s unlikely that much of it will be insured,” Hartwig said.

Bad news for airlines then, because they will have to bear the pain of lost business.

British Airways, which flies through Heathrow, one of the busiest airports in the world, hasn’t come up with an official estimate yet on how much money it is losing from the closure of airports, and said the grounding of its airplanes is not covered by insurance.

Hopes that airports will be opened soon may be premature.

Research from Aon Benfield, the reinsurance intermediary, showed that the last eruption of the Eyjafjallajokull volcano in 1821 lasted 12 months, though some reports suggest it rumbled on for two years..

And it’s not even among the 10 most dangerous volcanoes in Europe, according to experts from the Willis Research Network....MORE


Munich Re could offer volcano cover for airlines

Munich Re says it can help airlines with ash and snowfall given sufficient demand

Reinsurer Munich Re says airlines and airports are only "generally covered" for business interruptions in the event of "material damage" and so the volcano will have little impact on the reinsurer. However, it said it could offer "cover against such air-traffic interruptions due to force majeure as in the present case because of the cloud of ash or due to snowfall" and would be available if there was enough demand. A spokesperson said: "Given sufficient demand for such cover the group's know-how could in future help to ameliorate the consequences of such interruptions for airlines."

Munich Re added: "Even though the eruption makes a spectacular impression, it is not expected to cause major losses for the economy or the insurance industry."
From Family Guy:

Peter: "No, no, no. I read about this in a book once."
Brian: "You sure it was a book? You sure it wasn't nothing?"

Salesman: "How about I let you in on something every home owner needs: VOLCANO INSURANCE!
Now, I have an uncle that knows a lot about volcanos, and he says a volcano is coming THIS WAY."

Peter: "But we've never had any trouble with volcanos."
Salesman: "Well don't you think we're due for one?"

Peter (thinking): Touche, salesman. I too have an uncle.
Peter: Come in.