Alaska air carriers being squeezed by insurance premiums

Posted: Wednesday, February 27, 2002

ANCHORAGE (AP) -- Alaska air carriers are being squeezed by skyrocketing insurance premiums and a dwindling number of companies willing to write policies.

Now there are just a handful of companies offering policies in Alaska.

Air carriers and insurance officials blame high accident rates and repair costs, a slumping stock market and the cost of doing business after the Sept. 11 terrorist attacks.

The bottom line is that increased costs will likely be passed on to passengers.

Rates for Alaska air carriers have increased anywhere from 20 percent to more than triple in the past year, depending on the number of company claims, said Mike Salazar, a Ketchikan-based agent with Acordia Northwest, an insurance brokerage firm in Seattle.

''Most air carriers with a clean record had a 20 percent increase,'' said Salazar, adding that those who had claims are seeing rates go up as high as 200 percent or more.

Mike Vanard, vice president of Seattle-based U.S. Aviation Underwriters Inc., said insurance his company offers generally has risen 18 to 30 percent in the last year.

''Insurance is cyclical, it has big, sweeping curves. Right now we're at the opposite (high) end of that curve,'' Vanard said.

Orin Seybert, president of Peninsula Airways Inc., has been in the commercial airline business since 1956. The longtime Alaska aviator agreed the rates are cyclical.

''I look at insurance like a pendulum, it goes in cycles, every four to six years it goes up,'' Seybert said. ''It's been edging up there and it is absolutely the highest I've seen it.''

Seybert said insurance accounts for about 10 percent of his company's overall costs.

Vanard's company is one of about five or six companies willing to offer insurance in Alaska. A few years ago that number was at least a dozen, according to air carriers and insurance officials.

Nationwide, there also has been a decrease in the amount of companies willing to insure air carriers.

Aviation insurance companies, who write both general aviation and commercial policies, have paid out as much as $1.25 for every dollar taken in, but the company would still make money in investments during a healthy economy, said Thomas Turner, an aviation author and former insurance broker based in Cleveland, Tenn.

''Until a few years ago underwriters could operate at a loss, turn around and take the money and invest it in the stock market and make a small fortune out of it,'' Turner said.

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