The fatal June 1 crash of an Air   France flight may cause further price increases in the aviation insurance market, although it is too early to say for sure, according to observers.

Air France Flight 447 disappeared from radar amid tumultuous weather about four hours into its flight from Rio de Janeiro, Brazil, to Paris, killing 216 passengers and 12 crew members.Paris-based AXA Corporate Solutions led the coverage, and London-based JLT Aerospace Inc. was the broker, market sources said.

Other insurers on the coverage include American International Group Inc., which had 12.5% of the coverage, though its net loss is capped at $21 million, according to an AIG spokeswoman. Munich, Germany-based Allianz S.E. also participates on Air France’s account, according to the Insurance Information Institute, as does London-based Global Aerospace Underwriting Managers Ltd., according to published reports.

The hull of the Airbus A330-200 was valued at about $100 million, market sources said.The aviation market has been firming this year for the first time in five years, with average single-digit rate increases reported by brokers Aon Corp. and Willis Group Holdings Ltd. Brokers and other observers said the Air France accident could further price firming, although they cautioned it is too early to say for sure what the impact will be.

“After a number of losses in the first quarter, the market position had improved and the loss level was slowly coming back into line with recent years,” Steve Doyle, London-based executive director at Willis Aviation, said in an e-mail. “If the recent Air France loss proves to be very significant, the market could potentially react strongly with insurers under further pressure to raise premiums higher.” Magnus Allan, a London-based aviation analyst at Aon Aviation & Aerospace, said rates tend to be set by long-term loss history but that losses from the Air France crash could exert upward pressure.

“The Air France loss has certainly led to many underwriters taking a harder stance to airline renewals, but there still appears to be enough latent capacity to hold the increases down at this stage,” he said, via e-mail.

Paul Hayes, director at London-based aviation consultant Ascend Worldwide Ltd., said the accident likely won’t have a tangible impact on insurance negotiations, although “it certainly wouldn’t help.”

“With such a bad start to the year, (airlines) certainly haven’t given any respite to underwriters,” he said.
Legal experts say it is too early to speculate on the likely size of the liability loss because those payments vary widely depending on the personal details of the victims, such as their earning potential and dependents, and which country takes the case.