Flying with a new route?
With 2016 having drawn to an end, the aviation insurance market finds itself at a potentially pivotal moment in its cycle, where due to a collective number of factors, conditions are showing early signs of hardening and a shift in favour of the underwriter.
Whilst many will recall previous predictions of change that never materialised, there is a growing sense that this time it could be the real thing. A key market driver behind this is capacity, which during the past 12 months has contracted significantly for many airline risks, be it through withdrawals, reduced lines or increased selectivity. Revenue growth appears to have taken second place to profitability and underwriters now appear to be placing increased emphasis on margin as opposed to premium volume, taking the disciplined view of reducing their exposure to loss making or inadequately priced accounts.
In terms of airline safety 2016 was another exceptional year, however whilst this is important for the industry as a whole, when looking at the year-end claims position versus an annual premium that has reduced to its lowest figure since 1999, it actually doesn’t correlate to a good loss experience for underwriters and as such many will have suffered a third consecutive loss making year.
With talk of conditions having started to change rife in the aviation market at present and with recent renewal evidence to support this, underwriters will not want to start 2017 by losing their resolve and as such the early renewals in Q1 could prove challenging as underwriters test the water with what is possible. As our Lead Lines contributor comments “the stage is set for a challenging market in 2017”.
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For further information, please contact Richard Adams, Partner, Aerospace on +44 (0)20 7466 5220 or email firstname.lastname@example.org