A survey by insurance broker Gallagher has shown that the aviation sector is the area of business with the highest risk of corporate default as a consequence of the devastation caused by the novel coronavirus pandemic.

The survey was based on the opinions of 76 underwriters from 46 companies working in the London commercial insurance sector

The tourism and oil and energy sectors are also regarded as high risk, and in terms of insurance default, Zambia was pinpointed as the country causing most concern, but it is aviation where the risk is the greatest.

The survey was based on the opinions of 76 underwriters from 46 companies working in the London commercial insurance sector.

Already this year, Virgin Australia has gone into administration and been relaunched; Air Mauritius has also gone into administration and put its fleet up for sale; Colombia-based Avianca has ceased operations and British short-haul carrier FlyBE, which had preexisting financial problems, has been finished off by the pandemic.

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Credit insurance is a policy taken out to cover nonpayment for goods or services, and although there have not been many claims yet as a result of the pandemic, Matthew Solley, managing director of structured credit and political risks at Gallagher, said a rise was expected later in the year, as companies battle to avoid defaulting.

In April, in the early days of lockdowns, Reuters reported that planes with a total insured value of more than $160 billion had been grounded around the world, with Gallagher reporting that the largest number was in Singapore (205), with the Hong Kong Special Administrative Region (178) second and 158 planes on the ground in Madrid.

Bruce Carman, chief underwriting officer at Hive Aero, called the impact of the pandemic "something akin to a dystopian drama ...as COVID-19 wreaks havoc on an unprecedented scale", and warned that the lasting impact may be cultural as well as financial, with customers potentially losing a taste for travel.

"The insurance market plays an essential role in the world of air travel and we must work collaboratively with other key players such as banks and lessors, to help the airlines as far as we reasonably can in their hour of need," he added.

Peter Elson, CEO of Gallagher's aerospace practice, has told Insurance Business magazine of the particular risks the aviation sector faced.

In addition to the lost revenue caused by a huge slump in demand for flights, and the grounding of many services, reviving air travel posed many new practical challenges.

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"To prepare for resumption of operations, aviation operators have had to implement new operational processes and passenger safety measures, such as health screening, physical distancing and quarantine procedures," he said.

"In addition, some will be reviewing their routes and potentially refocusing on those where profit can be rebuilt most quickly."