As 2017 developed, the market witnessed an emerging trend for aviation insurance, with a degree of underwriting discipline and selectivity returning to the market.
The catastrophe claims that impacted the broader insurance market in 2017 might not have caused large losses for aviation insurers, but they have helped focus minds on airline insurance profitability.
Even though 2017 was the safest year on record – there were no commercial airline fatalities – most airline insurers will have struggled to make an underwriting profit.
Despite the absence of fatal airline accidents in 2017, the sector continues to experience attrition and partial hull losses which, given the new technology in aircraft, have become increasingly expensive to repair.
In the broader aviation market there have been a number of sizeable general aviation, airport and space claims as well as grounding cover claims from the aircraft manufacturers which, when coupled with the increased cost of repair from newer technology aircraft, is increasingly challenging underwriting profitability.
Impact on underwriting in aviation
A number of insurers have either withdrawn completely or exited classes within the aviation insurance market. Additionally, mergers and acquisitions have raised questions and it is anticipated this will somewhat curtail capacity further.
With the emergence of underwriting discipline, we are also seeing growing disparity among clients, where underwriters are more reluctant to deploy capacity to write large risks for accounts with poor attritional loss records or major losses.
Well risk-managed accounts with good loss records and growth in fleet or traffic however, continue to receive favourable treatment from insurers.
Given the fragile underwriting environment, many buyers are considering options such as renewing early and entering long-term agreements.
We are also seeing growing interest in bespoke solutions for new risks, such as cyber and IT dependency risks, as well as higher limits for certain catastrophic loss scenarios.
For more information, please contact ClientFirst@jltcanada.com.