Welcome to GlobalAir.com | 888-236-4309    Please Register or Login
Aviation Articles
Home Aircraft For Sale  | Aviation Directory  |  Airport Resource  |   Blog  | My Flight Department
Aviation Articles

As The Market Turns

by Darryl Abbey 1. September 2009 00:00
Share on Facebook

The aviation insurance market appears to have finally decided that prices are low enough. Sparked into action by the recent volume of airline losses (including Air France which is rumored to be reserved in excess of $600mm), helicopter losses and the effect of the overall economy on cost of capital, aviation insurance carriers have decided that it is time to at least stabilize premium levels and, depending on the market sector, started levying price increases on renewals starting this summer.

This transition toward higher rates is analogous to turning the Titanic or, more appropriately, a C5 aircraft: It takes a while and is not necessarily smooth. No doubt the market will target certain types of operations which the carriers consider high risk such as HEMS, off-shore service and other rotorcraft operations. Airlines will certainly pay increased premiums (to the extent they can afford them) and other areas of the aviation market which have experienced some losses in the past twelve months such as charter aircraft operators can expect higher insurance costs as well. Even the big aircraft, engine and component manufacturers are unlikely to see any premium reductions as the insurance carriers spread the anticipated cost of losses incurred so far in 2009 across the entire aviation insurance market.

The surplus of capacity which has built up over the past several years remains strong. There are currently no less than twelve carriers willing to underwrite aviation insurance in the US alone with additional capacity in London and other EU countries for large placements and non-US based risks. As mentioned in previous market updates, traditional supply and demand economics do not seem to have applied to the aviation insurance market for several years. Until very recently, prices have continued to drop due to excessive supply (read competition for market share) despite lower demand and higher loss ratios. But now, it seems that insurers are strengthening their resolve to increase their prices even though supply remains high.

Don’t get me wrong. I don’t think corporate operators (those that are still up and running) will need to worry much. The twenty year premium lows that they are experiencing will not increase much if at all because of their good loss record. Likewise, many Pleasure & Business aircraft operators will continue to enjoy low cost and, in some cases, higher limits than have been available for some time. This may continue until aircraft the aircraft sales market turns around. Once aircraft buyers jump back into the market and need insurance for their newly acquired aircraft (increasing demand), the market will likely respond with higher P&B rates. For most commercial aviation businesses, however, higher insurance costs are here now, or will be in the near future, at a time when most companies can ill afford it.

Is there a way to avoid premium increases? The best way to fight against higher cost is to educate your underwriter as to why you deserve his/her best treatment. This should include sharing information on your safety and training programs and everything you do to prevent losses from happening. Get to know your underwriter and help convince them that they want to give you the lowest cost. Your broker will also play a big role in helping educate the market so choose your representative wisely and make sure they have the ability to get the job done.

Remember, the aviation insurance market may harden significantly in the next year so be prepared, start your renewal process early and teach the insurance carriers why you deserve their best treatment.

Do you have additional experience with this topic? Tips, Tricks, or Advice? Please discuss it with us!

Tags: , , ,



GlobalAir.com on Twitter