Forward thinking and experienced broking key to strategic plan

24 January 2019

Underwriters exerted greater discipline throughout the all-important fourth quarter renewal period for aerospace insurance buyers, resulting in rate increases across virtually all segments of the business.

Over the course of last year, capacity has been eroded as a growing number of insurers withdrew completely, exited specific segments within aerospace or scaled back due to margin pressure.

While theoretical market capacity remains sufficient to satisfy demand, underwriters are now cautious in how much they deploy and where, taking a far more selective and differentiated view on individual risks than they did in the past.

The drive for change is a symptom of wider insurance market conditions and a response to a lack of profitability in the aerospace sector, where rising attritional losses coupled with instances of major and catastrophe losses had almost completely eroded margins.

The insurance market appears resolute in addressing underperforming classes, spearheaded by Lloyd’s performance review, which has seen a number of syndicates cease or cut back underwriting on certain lines, including aviation.

Capacity in the aviation market has also been affected by consolidation in both the Lloyd’s and company markets, where the number of players has reduced as a consequence of mergers and acquisitions.

Well-managed airlines with a good record can still receive comparatively favourable treatment, but are nevertheless experiencing some level of rate increase. 

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For clients with high attritional losses and/ or recent major losses, underwriters are looking for a significant correction.

Upward pressure is coming from both lead and following markets, the latter often demanding higher price increases than those sought by lead markets for some of the more challenging accounts.

These conditions are likely to persist through 2019 as insurers focus on profitability and discipline intensifies, encouraged by having, to some extent, achieved their targets in the final quarter of 2018.

Forward thinking, experienced broking, active stewardship and creativity are key to developing an effective strategic plan and will pay dividends for clients as the market enters this harder phase.

For more information, please contact Phil Gingell, Executive Chairman, on 312-235-8203.

This article is compiled for the benefit of clients and prospective clients of companies of the JLT group of companies (“JLT”). It is not legal advice and is intended only to highlight general issues relating to its subject matter; it does not necessarily deal with every aspect of the topic. Views and opinions expressed in this document are those of JLT unless specifically stated otherwise. Whilst every effort has been made to ensure the accuracy of the content of this document, no JLT entity accepts any responsibility for any error, or omission or deficiency. If you intend to take any action or make any decision on the basis of the content of this document, you should first seek specific professional advice. The information contained within this document may not be reproduced and nothing herein shall be construed as conferring to you by implication or otherwise any licence or right to use any JLT intellectual property.