The loss of humans in Wednesdays Airblue plane crash is extremely distressing. The death of the bright youth parliamentarians, newlywed couples, emerging professionals, aircraft crew and all others will be an agonizing loss for their relatives, coworkers and loved ones.
And though the loss of lives can never be recovered, economic losses due to any catastrophe are partly covered as per international aviation policies. This includes comprehensive insurance coverage of the aircraft and passengers, personal accident coverage of the crew and third party insurance for any air travel. The ill-fated Airblue flight was no different.
However, none of the local government-owned or public insurance companies is capable of covering aviation or oil drilling activities due to a lack of expertise and limited capacity.
Therefore, local insurance companies for such capital-intensive industries usually act as facilitators between international insurance companies and the respective industry seeking insurance cover. The international insurance provider, on the other hand, spreads the risk by reinsuring their claims portfolio with other companies, or underwriters.
In the case of Airblue, EFU General works as a liaison between the airline and a London-based syndication of international insurance and reinsurance companies. In light of this, though Airblue and families of the crew and passengers will get some monetary compensation, the financial claim cost of the local facilitator, EFU General, will remain unaffected.
The bulk of insurance claims is going to be the aircraft hull, the coverage of which, according to industry experts, is anywhere between $20 -$40 million.
There won be any third party claim, which is usually levied when the plane crashes into someone elses property. For instance, if the plane had crashed into the Blue Area of Islamabad, all those affected would have claimed the property and life damage compensation.
In case of passengers insurance, the coverage might not be close to international standards, since it was a domestic flight.
PIA usually covers its domestic travelers for accidents and life loss to the tune of Rs0.5-0.7 million. Airblue being a private organization might have a better coverage, but it would most likely be below the mark of a million rupees per person.
While other claims such as credit card insurance claims, personal life assurance claims of passengers, and corporate insurance coverage will also be involved, these are not a liability on the airline or its insurers.
For 150-odd people the insurance claims will probably be below 5-10 percent of the coverage under the aircraft hull insurance. If this accident would have taken place in a developed economy, the relatives of the deceased could have either sued the air company or aviation authorities or both for negligence.
However, before investigations are complete, one cannot be sure if the accident happened because of the negligence of someone on ground.
Even if it did, the relatives will not take the hassle of suing the airline, not very efficient legal system. This leaves the option of an out-of-court settlement, which most will probably opt out of, keeping in mind the prevalent religious beliefs.
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