Insurers worldwide are going to have to pay up to a record $800 million to cover the damage done by attacks on airplanes this year, driving prices up and drawing rivals into the market.

The hefty bill dwarfs the $60-$90 million in income insurers received last year to cover the incidents, which have included the downing of Malaysia Airlines’ MH17 passenger jet in Ukraine, and could mean some bow out of the market if the price increases are not enough to stay profitable.

New market entrants keen to tap the higher rates, but without obligation to pay any of the claims, could well prove the winners in coming weeks as large airlines and insurers begin in earnest to renegotiate their annual insurance contracts.

“Depending on what happens at these renewals, people might reconsider their position (in the market),” Atrium Underwriting CEO Richard Harries told Reuters.

“We know the price we want for business, and if it hits that price, we’re in, and if it doesn’t, we’re not,” he added, saying he still expected Atrium — which currently leads the insurance market covering attacks on planes — to remain in it.

The prospect of heavy claims has kept the market tense since July, when, within less than two weeks, MH17 was shot down over Ukraine, an Air Algerie flight crashed in Mali due to unknown causes, and fighting destroyed nearly all the planes docked at the main airport in Tripoli, Libya’s capital.

This followed closely on the heels of the disappearance of Malaysia Airlines’ MH370 passenger jet and a militant attack on Karachi’s international airport.

The price of insuring a plane against attack is likely to more than double, and more than triple in conflict zones such as the Middle East, said Peter Eden, senior vice-president at insurance broker Lockton Companies.

Very roughly, a new aircraft worth $200 million belonging to a major airline could currently be insured against attacks for about $40,000, although the price tag varies depending on the likelihood that the carrier will be targeted.

The prospect of richer pickings has already drawn some in.

Lloyd’s of London insurer Cathedral Capital lured four leading aviation insurance experts from Atrium in April, one month after the high-profile disappearance of the MH370 passenger jet — half the claims of which are being paid out by so-called “aviation war” insurers.

One of Cathedral’s new hires, Bruce Carman, formerly headed the Atrium team that led 30 percent of the aviation war insurance market’s business, including MH17’s policy.

He told Reuters he had moved to Cathedral specifically to build an airline and aviation war book, stepping into this role in early October at the very start of price renegotiations.

Analysts, brokers and underwriters said they expected claims between $650-$800 million, with the top end of this range beating losses of $700 million from the Iraq war in 1990, unadjusted for inflation.

History Repeats?

The picture was similar in the aftermath of 9/11, when a huge swathe of investment exited the sector immediately after the heavy losses, forcing premiums up as high as $350 million by the end of 2001.

Very soon, however, this huge rate rise drew a lot of new players and their money into the market again.

Premiums have tumbled since then, weighed down by relatively low claims and the market’s overcapacity from post-9/11 new entrants, which never left after they swarmed in.

There were about two to three times fewer planes to insure at the start of the millennium, however, meaning broker estimates for a doubling of this year’s premiums to $120 million could disappoint some insurers given the scale of recent losses.

“Prices should go up, but as capacity floods in, there is massive oversupply and the market is not going to be able to see the payback that it should – that’s the conundrum,” Carman said.

The right rise in rates, however, could make sticking around through the losses worth it.

“It is more imperative than ever that each insurer is clear as to its walk-away pricing,” David Slevin, head of aerospace insurance at Lloyd’s insurer Hiscox Ltd, told Reuters.

Airlines currently pay about 50 cents per passenger to insure planes against attacks and other risks, such as accidents, Slevin said. “That is less than you would spend on toilet paper,” he added with a chuckle. (Editing by Mark Potter)