Insurance premiums for airlines continued to go down during the first half of this year in what remains a buyers’ market, according to a report by Willis Group Holdings.
The loss of an Asiana B777 aircraft in a tragic accident will do little to alter the downward trend in premium prices in the airline insurance market, according to the report in the second quarter issue of Airline Insight, a Willis newsletter.
Willis says that premium levels have reduced by 5 percent in the first half of the year, which equates to $13 million being eroded from the overall market premium.
Meanwhile, the growth in exposures continues to consistently be in the mid-single digits and as a result rating levels continue to decline with average hull rates down 11 percent and average liability rates per passenger down 13 percent, according to Willis. This has resulted in the overall cost per passenger for insurance falling by 12 percent.
Willis estimates that losses for the first six months of the calendar year (excluding Asiana) are will be about $488 million.
“The low loss levels combined with abundant capacity and growth in exposures continues to provide perfect conditions for buyers and challenges for underwriters, with little sign of a change in any of the market drivers and as a result the downward slide in premiums looks set to continue unabated,” said Phil Smaje, CEO of Willis Aerospace.
Smaje said that in recent years the airline insurance market has seen a number of new entrants bringing additional capacity and that this, combined with a series of consecutive years of low frequency and low severity losses, has served to further increase competition and drive premium prices down.
“At this point, it is difficult to see how a single catastrophic event could reverse this prolonged period of rate softening,” he said.