Insurers give Emirates ‘outrageously’ cheap war insurance cover

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Emirates is paying far less for “war risk” cover than rival airlines, according to multiple insurers with direct knowledge of its policy. 

One insurance executive said the airline’s additional premium of about $100,000 a week, agreed since the US and Israel launched their war against Iran, looked “outrageously” low given the heightened risk of transit to and from the Middle East. The four-week conflict has caused thousands of flights to be cancelled in the region.

At least one insurance group declined to join the deal because of the low rate agreed by Atrium, the lead insurer.

“It’s very cheap cover, that we and others have not agreed to,” said another executive with knowledge of the policy.

Emirates’ war risk premium covers its entire fleet flying to and from Dubai. However, other airlines based outside the Gulf are being quoted $70,000 to $150,000 in additional charges for every flight that lands in the region, according to multiple people.

Private jet operators have faced an individual premium of up to $50,000 to fly a single aircraft into the region.

Dubai’s main airport, which uses the code DXB, has been repeatedly forced to pause operations during the conflict because of missiles or drones and the damage they have caused. On multiple occasions, flights coming into Dubai have been stuck in holding patterns because of missile activity nearby. 

International airlines have also chafed at their heightened charges for flying to nearby countries. One executive at a European carrier said the insurance quotes amounted to “blackmail”.

“You effectively have to fall in line, otherwise you risk not writing Emirates’ [business],” said an insurer that had signed up to cover the airline at the lower rate.

In addition to Emirates’ market power, that insurer pointed to the carrier’s experience of flying in the region and the large number of planes for which it buys insurance. That scale gave the airline the ability to negotiate lower prices.

WTW, Emirates’ insurance broker, negotiated a “war risk” policy allowing the carrier to continue operating from Dubai.

This policy covers Emirates for the first $2bn of losses on its fleet, which in total is worth tens of billions of dollars, according to insurers. 

The figure is close to the maximum cover available through global speciality insurance markets. Emirates declined to comment on commercial agreements.

Gulf carriers typically received more favourable rates than international rivals that had aircraft based in other locations, industry executives said. Gulf airlines also had experience of operating hundreds of flights a day through the region’s airspace, and close co-ordination with its airports and authorities, they added.

Emirates is not the only Gulf carrier to have restarted operations. Etihad is flying out of Abu Dhabi, Air Arabia from Sharjah and Qatar Airways operating a limited service from Doha. Emirates remains the largest, flying more services than its two premium rivals — Etihad and Qatar — combined. 

Flights leaving Dubai follow a tight air corridor heading south. The UAE military scans the sky and flights are only allowed to land and take off when it is safe to do so, diplomats and officials stress.

French and British fighters, which have advanced radar systems, have joined the Gulf state’s defensive cordon against drone attacks, they add. 

Emirates, a vital pillar of Dubai’s economy, has resumed more than half its pre-conflict services, although passenger numbers remain well down according to people familiar with the matter.

Global airlines have largely avoided flying into Dubai since the war started. Virgin Atlantic briefly restarted flights, only to cancel again after several days.

British Airways, Lufthansa and Cathay Pacific are among carriers that have cancelled all services to Dubai until at least the summer over safety concerns and lower demand. 

John Strickland, an aviation analyst, said high insurance costs would also be a “show-stopper” for carriers flying into the area. Emirates would comply with safety requirements and not skirt the rules simply to maintain the appearance of regular operations, he added.

Dubai’s airport itself has said that passengers would return if airlines ran flights.

“Most of the problem has been insurance,” Paul Griffiths, Dubai Airports chief executive, told CNN last week. “If foreign governments would underwrite . . . the operation of their airlines to the UAE, then obviously we will do everything we can to facilitate those.” 

He insisted the airport was “not turning anyone away” from flying into the city, whose flights have been dominated by Emirates and budget carrier Flydubai since the conflict began.