There has been little change in market conditions for the aviation insurance market in recent renewals, with premium and rates continuing their downwards trajectory.
However, there are signs that the insurers’ tolerance for further erosion of premium is starting to end – underwriting selectivity and risk differentiation are having a significant influence on individual renewal results in 2016.
Perhaps the most topical area in aviation insurance at present is the airline hull war market.
This market often goes without loss for many years – up until 2014 it had been almost claims free for the past 13 years. However, it suffered the most costly and prolonged period of losses in its history during 2014 and 2015, with combined claims in excess of USD700 million.
The increased loss frequency has subsequently put severe pressure on the hull war market. A number of underwriters have pulled out of the hull war market, resulting in a significant reduction in capacity. The remaining underwriters are being very selective in their participation.
Consequently, there is mounting pressure on the hull war sector to take a harder stance. Given political uncertainty, terrorism will remain a threat for the foreseeable future, adding to the pressure for underwriters to maintain discipline for some time.
Topical tip for buyer
The potential for a severe reaction to large losses or a market changing event should be a concern to all buyers, who naturally seek stability. Many clients are engaging in longer-term deals that provide a degree of protection from such volatility.
We also recommend that clients identify key partners in the insurance market, rather than taking knee-jerk reactions. Building solid relationships with these partners should lead to a steadier price for the airlines.
For more information, please contact ClientFirst@jltcanada.com.