Willis’ monthly airline insurance insight report indicates that “the insurance market has remained remarkably stable for airlines, with no change in the drivers of capacity and claims.
“The experience of 2011 continues to demonstrate the uncertain nature of airline insurance, as there have been just five losses in excess of $10 million with no losses in excess of $50 million, for a total of around $400 million in, “the lowest total in six years,” according to the report from Willis’ aerospace division.
However, Willis also warned that this period of unprecedented calm, “could be the precursor to a more turbulent third and fourth quarter for airline insurers. At the halfway stage, the market has generated less than $0.25 million of additional premium. Despite the lack of additional premium, fleet values have increased by seven percent, while passenger exposure has increased by 11 percent.”
Willis’ report noted that there “continue to be renewals that, for various reasons, experience treatment outside the market norm, said Willis. There were programs that received premium increases in excess of 100 percent, largely as a result of losses on the expiring policy. Other programs received premium reductions in excess of 25 percent thanks to dramatically reduced exposure.
“The top 50 airline insurance programs by passenger numbers continue to demonstrate the value of economies of scale as they received an average premium reduction of five percent against above average exposure increases of 11 percent in both fleet value and passenger numbers.
“The second half of the year might make for more interesting times, as July is the most significant renewal period outside of the final quarter, representing 16 percent of renewals and 13 percent of the annual premium.”
Steve Doyle, Business Development and Sales Director for Willis Aerospace, commented: “If the next few months see no major deterioration in the loss position and no withdrawal of capacity then underwriters will feel increased pressure in the final quarter to further reduce not only rates, but premiums levels. This remains a catastrophe business, and much can happen, but if we are looking at when the bottom of the cycle will be reached it seems increasingly likely that we are not there yet.”
Source: Willis Group Holdings
Topics Aviation
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