Little movement in aviation insurance ratesPosted On: Dec. 5, 2017 7:12 AM CST
Aviation insurance rates are largely holding steady during renewals, with accounts with good loss records seeing flat renewals and more troublesome accounts seeing increases, aviation insurers and brokers say.
Plentiful capacity remains available in the sector and the catastrophe losses that hit the property/casualty sector in general do not appear to have affected the aviation insurance sector, they say.
Brad Meinhardt, Las Vegas-based area president and managing director of Arthur J. Gallagher & Co.’s aviation practice, said capacity is steady and underwriters are eliciting discipline offering flat renewals to some policyholders and moderate increases to others.
“Essentially the story is that if you’re a good operator, you’re most likely going to get an ‘as expiring’ and if you got worse claims than your peers, you’re probably going to get an increase,” Mr. Meinhardt said. “And it’s really back to the basics. Fundamentals of underwriting have remarkably returned to aviation.”
In the final quarter of the year, roughly 75% of the world's airline fleet renews its coverage.
In its November Marketplace Realities report, Willis Towers Watson P.L.C. said capacity in the aviation market continues to be plentiful, and this is creating positive conditions for buyers.
“While some insurers are tightening their pricing and may be willing to part ways with buyers if technical rates cannot be achieved, other insurers will likely be willing to step in and fill the void at competitive terms,” the Willis Towers Watson report said.
Worldwide aviation and airline losses have been relatively low, according to the report.
Steven Allen, Atlanta-based senior vice president of general aviation for QBE North America, a unit of QBE Insurance Group Ltd., said capacity is reduced or at least leveling off.
“Many carriers are taking a harder look at how much they’re going to deploy on any one account,” Mr. Allen said.
Peter Schmitz, Lockton Cos. Inc.’s aviation practice leader, said that airline safety, especially within the United States, has improved considerably over the past several years, with advancements in aircraft design, flight training and avionics contributing to an improved experience.
“However, attritional losses continue to erode the premium base for underwriters and increase insureds’ total cost of risk,” he said in an email. “The industry as a whole has focused on safety and the results show significant improvement over prior years. Without question, this has been a contributor to the length of the soft cycle and increased capacity.”
During the third quarter, property/casualty insurers reported significant losses from natural catastrophes, but those losses do not appear to have affected aviation renewals, said Gallagher’s Mr. Meinhardt. “There’s none of that talk going on.”
John Geisen, Minneapolis-based senior vice president at Aon Risk Solutions, noted that the aviation segment can be attractive to insurers because aviation risk losses are not necessarily parallel to property and auto results.
“The fact is, our assets can get moved out of harm’s way and to some extent that has continued to be attractive component of a risk approach that many capital providers look to,” he said.