Natural catastrophes caused 2017 to be one of the most expensive loss years on record for the insurance market. The impact of these events was far reaching and has, to some degree, affected the majority of classes and market sectors throughout the insurance industry.
In the aviation insurance market these events, in conjunction with aviation claims that are close to exceeding or according to some reports exceed market income, have brought an end to more than a decade of rate softening and created a tougher market environment than has been seen for some time. Underwriters are now maintaining strong pricing discipline and on average aviation accounts are now renewing as expired, or with increases to reflect any rise in exposure.
This is a big change for the aviation market. Rates have stabilised at a time of continued improvements in airline safety – 2017 was the safest year on record for commercial airline passenger fatalities. However, the much higher cost of repairing the latest generation of aircraft and engines has led to some large non-catastrophic losses, which we estimate in the aggregate are close to the market’s total annual premium.
The recent stabilisation of the aviation insurance market can be viewed positively. Aviation underwriters will be competing with underwriters from others classes of insurance for capital and further rate reductions could have been considered unsustainable with the result that any subsequent (and inevitable) hardening would be more extreme and therefore harder for buyers to plan for.
Although there are relatively few renewals in the first quarter of the calendar year, compared to the much larger number of accounts renewing in the later months, all indicators point to an interesting change in market dynamics and whilst challenging this will give opportunities for innovative solutions, something our market has a history of providing.
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For further information, please contact Richard Adams, Partner on +44 (0)20 7466 5220 or email email@example.com