Airline insurers are reviewing cover for aircraft involved in hostile acts such as the downing of Malaysia Airlines flight MH17 as the industry faces its most expensive year since the 9/11 attacks in 2001 with annual losses set to pass $2 billion.
Senior insurance brokers have warned that some underwriters are demanding more than threefold increases in premiums in recent days for so-called "war" insurance policies.
Some insurance companies want details of exact flight paths and are considering withdrawing completely from providing certain types of cover for flights over hotspots in the Middle East and parts of Africa, the brokers added.
Fear of soaring claims for airline war policies comes in the wake of recent fighting at Tripoli airport in Libya, which damaged almost two dozen planes, as well as the MH17 disaster, which killed 298. Payouts on war insurance policies alone are expected to reach several hundred million dollars this year.
Airlines are vulnerable to abrupt changes in policy terms of war insurance, which covers physical damage to aircraft from hostile acts. Such policies can be cancelled with just seven days notice.
On top of war insurance, airlines spend several times more in premiums – typically amounting to millions of dollars each for major airlines – on separate coverage known as "all-risk" policies. These policies are likely to see a rise in premiums but nothing like the increase expected for war insurance.
Malaysia Airlines is likely to face higher-than-average increases, brokers said, especially given the MH17 disaster struck little more than four months after the disappearance of another of its jets.