ET409 crash resulted in a fivefold increase of claims over the 2009/10 fiscal year

The corporation registered a gross profit before tax of 146.3 million Br for the year 2009/10 with an increase of 52.8 million Br or 56.5pc over the results of the year 2008/09 which was 93.5 million Br.

Claims incurred by the Ethiopian Insurance Corporation (EIC) in the last budget year due to the loss of life and property by customers reached a staggering 1.5 billion Br, most of which resulted from the accident of the Ethiopian Airlines Flight 409 that had crashed off the coast of Beirut on January 25, 2010, in which 90 people died.

Total claims reached 1.3 billion Br, 482.1pc more than claims incurred last year, and 1.2 billion Br, 353.8pc more than its projection, bringing its corporate loss ratio to 231.4pc.

Claims on motor, life, and other insurance also contributed to the increased total in claims next to aviation insurance, said Yewondwossen Etefa, managing director of the EIC, at the 24th management meeting, held on Saturday, August 28, 2010.

So far, out of the claims incurred in aviation insurance, 520.8 million Br was paid in compensation, with 841.2 million Br pending.

The huge increase in the claims incurred will have some implications for the operations of the corporation, since it now has to pay more in premiums to its reinsurers, an expert in the insurance business who requested anonymity told Fortune. The increase in this expense will force the corporation to collect more premiums from its customers, increasing the risk it undertakes.

The corporation paid compensation worth 166.4 million Br for claims on motor insurance while 136.2 million Br is pending.

"The increase in the claims for compensation in this insurance coverage has had negative implications for the profits of the corporation as well as for the underwriting result," Yewondwossen said. "We will have to revise the issuance of motor coverage and the compensation payments."

The corporation intends to increase the prices of its premiums for motor vehicle coverage, this might indicate, which also might have a negative impact on keeping its customers, according to the expert.

The net premium earned in the last fiscal year was 833.7 million Br, and this has shown an increase of 30.8pc when compared to the preceding year's performance.

The state owned EIC made a gross profit of 146.3 million Br before tax, which exceeded last year's profit by 52.8 million Br. The profit exceeded the corporation's projection by 63 million Br while its total assets reached 1.4 billion Br, showing an increase of 108.3 million Br.

The Ethiopian Insurance Corporation was established in 1975 by the government and was under the National Bank of Ethiopia (NBE) until its reestablishment in 1992 as public enterprise. It remains a state owned enterprise and has been administered by the Public Financial Enterprises Agency (PFEA) since January 2004. The PFEA represents the state and plays the role of the owner in discharging its duties and responsibilities.

By ZEKARIAS HADDUSH

FORTUNE STAFF WRITER