Insurance companies hit hard by fatal crash

Bloomberg

The families are entitled to the equivalent of at least $150,000 for each of the passengers, and Axa is ready to begin negotiations for additional payment, said Patrick de La Morinerie, who oversees aviation at a subsidiary of Paris-based Axa.

The insurer is notifying relatives this week they can receive an initial payment of about $24,000 per victim, an offer mandated by an international treaty on air travelers’ rights.

American International Group, Allianz among insurers

The cost to Air France-KLM’s pool of insurers, which includes Allianz and American International Group, will depend on estimates of the travelers’ nullified lifetime earnings and any negligence demonstrated by the airline.

Insurers covering plane manufacturer Airbus SAS and servicing contractors may also be liable once officials determine why the A330-200 dropped into the Atlantic Ocean.

"It’s going to be an expensive claim," said Stephen Riley, executive director of Global Aerospace Underwriting Managers, which has 7.5 percent of the plane’s coverage. "This will be the largest loss to the insurance market arising from an aircraft accident since that loss in late 2001," when a flight from American Airlines crashed in Queens, New York killing 265 people and costing about $600 million, he said.

Compensating victims’families

Riley has said his firm is backed by Warren Buffett’s Berkshire Hathaway. AIG, the insurer that received a $182.5 billion government bailout, has 12.5 percent of the coverage on the Air France flight, said Marie Ali, a spokeswoman for the New York-based company’s property-casualty unit.

The insurer’s net loss on the coverage is capped at $21 million, she said. Airlines are responsible for compensating victims’ spouses, children and, in some cases, parents, and can seek to claw back a portion of the awards from potentially liable parties like the plane maker.