Lloyds Of London Estimates $600 Million Hit On Insurance Industry Over MH Jets & Rebel Seizure Of Libya Airport

The global insurance industry is bracing itself for a $600 million hit for 2014 in the aftermath of the two Malaysia Airlines tragedies and the seizure by rebels of the Tripoli airport in Libya.

Inga Beale, chief executive of Lloyds of London, the world's largest insurance company, explained the large amount to the unusually high incidence of aviation mishaps in 2014 which would likely result in higher cost of insuring jets.

"The global aviation hull war market accounts for around $65 million of premium per annum; yet already in 2014, claims could exceed $600 million for the insurance industry. In a period when insurance rates have generally fallen this is a reminder of why pricing must reflect the underlying risks which are being written," The Independent quoted Beale.

While chances are the aviation claims would be astronomical, claims due to natural disasters are down 12 per cent, resulting in Lloyd's enjoying a 21 per cent hike in its pre-tax profits to £1.67 billion from January to June 2014.

Among the weather events in the first half of 2014 that led to losses for insurers are the severe cold winter in North America and Japan, windstorm and tornado hits in the US and floods in UK.

For the same period, Lloyd's investment income went up to £642 million from £247 million, while its combined ratio, which measures how much insurance premium is paid in claims and expenses, went up slightly to 88.2 per cent from 86.9 per cent.

But Lloyds' combined ratio is better than other insurers such as AIG or Munich Re, said John Nelson, the company's chairman. He added that the relatively benign period for natural disasters provided the company with substantial capital for the coming US storm season.

More discussion on the impact of the twin MH tragedies on the market in this video.

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