Proponents of commercial aviation always cite statistical data to show that the safety records of the airline industry is much more impressive than that of the other types of transportation such as cars, buses, trains and passenger sea vessels. But while they focus on the frequency factor, the proponents often overlook to mention the high severity rate of aviation accidents.  Commercial airlines usually fly with a passenger load of several hundreds, and more often than not, it is not unlikely that an unwanted crash could cause the death of all the passengers on board that tragic flight.

If one wishes to reach a destination as fast and comfortable as possible (barring unexpected air turbulence), there is nothing like taking a plane, but in exchange for the time savings, one has to assume some risk as a trade-off. Besides, in this modern day and age where travelling is often times a business or personal necessity, how can we do it without the services of commercial airlines?

When there is a serious aircraft crash this is the likely scenario. One can be sure that the aircraft was insured in the London market usually with Lloyd’s, whose intelligence is such that they knew of the aircraft crash even before the news came into print, and their representatives were at the crash site together with the other rescue team members.

After the burial of the victims and the mourning period, the aircraft owners will be called upon to indemnify the legal beneficiaries of the crash victims. Any aviation loss where many lives are involved sends ripples throughout the international reinsurance market because one principle is to spread the risk and most of the major reinsurers also reinsure (the technical word is “retrocession”) their surplus risks with other reinsurers.

Despite the best maintenance and the adoption of adequate safety measures by the airline industry, accidents do happen due to other causes beyond their control such as pilot error, extremely bad weather, and other unexpected causes. The role of insurance is to minimize the impact of financial loss due to unforeseeable and accidental events and it fully supports the continuous upgrading of safety standards by the airline industry to eliminate the occurrence of disasters. As a matter of fact, aircraft are insured only after being certified as airworthy by competent authority.

The author is a risk management consultant and Editor of Insurance Philippines magazine.

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