Aviation

Price Prediction: Aviation

Airlines
+7.5% to +15%, Loss free
Aircraft Leasing
Flat to +5%, Loss free
General Aviation
Increases from 10% up to and exceeding 50%
on loss active business
Aerospace (loss free)
Airports / ANSPs:
+7.5% to +15%
Manufacturers / MROs:
+5% to +15%
Ground Handlers / Refuellers:
+5% to +15%

Contact

Patrick Richardson
Aviation
T: +44 203 124 6287
E: patrick.richardson@willistowerswatson.com

Airlines

Insurers have continued to push rates with increasing confidence in 2019 building on the momentum achieved at year end 2018

The move towards a more technical approach to rating now broadly applied with risk-adjusted rate changes the standard as insurers take a more forensic approach to exposure and rate-adequacy

Clients able to articulate their approach to operational excellence, demonstrate tangible investment in safety and clear Enterprise Risk Management processes have a better chance of distinguishing themselves and their terms

Insurer approach to underwriting varies by client and is dependent on factors including historic claims experience, an airline’s prior buying behaviour and their management of the insurance market during ‘buyer-friendly’ cycle, as well as being influenced by capacity demand and the risk management story

Airlines with clear controls over their buying strategy and that have management support and oversight are able to more successfully navigate the tightening market

Underwriting attention largely directed to rate-adequacy, although terms and conditions are coming into focus

Greater coverage extensions such as Loss of Use and Increased Cost of Working incorporated into programmes over time, are under greater scrutiny from underwriters

Systemic nature of loss widely evident through recent airline disasters, bringing further scrutiny to loss modelling methodologies as well as contract language around event triggers

Risks requiring over USD 2 billion of liability limit experienced reductions in overall market capacity with greater challenges experienced for loss-affected risks

Reduction in capacity compounded further by limitations over the amount of premium income that Lloyd’s Syndicates are authorised to write during the calendar year

Heavily-weighted year end for airline renewals likely to cause additional rating pressure on clients as Lloyd’s Syndicates in particular, make strategic decisions around which clients to support and how they deploy capacity in an environment where income restrictions are likely to create greater client selectivity

Composite pricing ‘narrowed’ as following insurers judge the adequacy of rate based on their own specific needs rather than previously being influenced by the Lead insurer offer

Pressure on Lead insurers to evidence client continuity in their renewal assessments creating a difference opinion between the Lead insurer and following markets in a rising market

Increased deployment of technology and resultant impact on claims inflation playing an increasing role in the cost of attritional loss activity

Recent airlines losses intertwined with significant global product losses will shape the market over the next 12 months

Aircraft Leasing

Remains a sector attractive to insurers with rating reductions still available as a trade-off to exposure growth

Yet to follow the rate increases of other aviation classes but conditions not as favourable as in previous years

Some reductions in capacity from markets exiting the whole aviation class but the sector remains profitable and predominately, loss free

General Aviation

Rate increases now standard on all business, irrespective of loss record or fleet growth.

Reduction in capacity following withdrawal of insurers, reduced line structures and limited/focused underwriting appetite.

Composite pricing increasing faster than lead pricing.

Pricing above lead terms now a reality.

Underwriters seeking to rationalise coverage, including the review of Hull Deductible levels.

Loss of Delegated Placement Authorities and Insurer Consortia contributed to pricing tension and extended the time required to market risks

Greater focus on detailed underwriting submissionsPrice Prediction

Increases from 10% up to and exceeding 50% on loss active business

AerospaceSignificant change in this sector’s market trading conditions will affect 2019 placements:

International aviation insurance market is contracting through Insurer consolidation, Insurers exiting aerospace market and greater focus on unprofitable business

Greater selectivity by Insurers

Losses continuing to affect (Re)Insurers’ profitability – a reduced premium base combined with the ever increasing costs of attritional losses has negatively impacted insurers’ loss ratios during 2017 and 2018

Underwriting becoming much more disciplined, Insurers are looking to raise rates and review coverage on under-performing business

Insurers have a definitive requirement for detailed information and client engagement

Stricter underwriting guidelines driven by actuarial risk modelling, with senior management oversight ensuring that discipline is rigidly enforced

Vertical pricing discounts being shortened with following markets requiring close to, or lead insurer terms