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Munich Re facing claims bill of up to €120M from Ethiopian Airlines crash

Munich Re Co. estimates that it will have a claims bill of between €100 million and €120 million from the March 10 Ethiopian Airlines crash, one of the reinsurer's top executives told journalists March 20.

Torsten Jeworrek, CEO of reinsurance, said at a press conference for Munich Re's final 2018 earnings that the company was expecting claims from the loss of the Boeing 737 Max 8 jet itself, the loss of passenger life, and also manufacturer Boeing's potential liability for the worldwide grounding of 737 Max 8 aircraft in response to the crash.

SNL Image

Rescuers work March 11 at the scene of the Ethiopian Airlines crash that occurred a day earlier.
Source: Associated Press

Munich Re, the world's biggest reinsurer, has a 49.96% share of London-based aviation insurance pool Global Aerospace, which The Insurance Insider has reported is the lead underwriter on Boeing's product liability policy, which includes cover for grounding of aircraft.

The policy has a sub-limit of about $500 million per grounding occurrence and a total limit of about $2.5 billion, the Insider reported March 12, citing market sources. Global Aerospace has a share of at least 10% of Boeing's manufacturer liability cover, the Insider said.

Jeworrek said Munich Re's claims would come both through its participation in the Global Aerospace pool and through risks it had underwritten directly. He also said the reinsurer's claims from the event were "capped" by an upper limit in the coverage.

Aviation regulators around the world, including the U.S., U.K. and EU, have grounded 737 Max 8 jets following the crash, the second in five months involving the aircraft type.

Other insurers and reinsurers have confirmed exposure to the Ethiopian Airlines crash. Reuters reported March 18 that Hannover Re parent Talanx AG CEO Torsten Leue had put his company's exposure at slightly above €10 million. Swiss Re AG confirmed to Reuters the same day that it was among the group of insurers providing Boeing's manufacturer liability cover and a co-insurer of Ethiopian Airlines.

Ethiopian Airlines flight 302 from Addis Ababa to Nairobi crashed six minutes after takeoff March 10, killing all 157 passengers and crew on board. In October 2018, Lion Air flight 610, also a Max 8, crashed into the Java Sea 12 minutes after departing on a domestic route in Indonesia, with all 189 passengers and crew killed.

In both cases, the pilots reported flight control issues, which have been linked to an anti-stall system on the 737 Max 8.