Update from London on the aviation market
The calendar year 2009 has certainly not been a winner for aviation insurance underwriters, since they expect losses of approximately $2 billion USD and estimate the premiums generated will only total approximately $1.5 billion. The result has been an increase in renewal rates in the range of 20% to 30% for insured/airlines, or more in some cases. Actual renewal dollar increases are at a slightly lower rate of about 10 to 15%.
As for the rating basis, airline passengers are down, therefore the premium associated with RPM’s (revenue passenger miles) are lower. Many operators have parked aircraft but continue to take delivery of new equipment. In past years, when the market was such that underwriters were not making profits, the trend would be a reduction in overall underwriting capacity. This year, we are seeing capacity to be stabilizing or even increasing in some cases, which assists in our continued pressure to keep any increases moderate.
The majority of the world airlines renew their insurance coverage in the last quarter of the year, and most underwriters’ reinsurance treaty renewals expire on January 1st. So stay tuned over the next month for what we can expect in the coming year within the aviation insurance marketplace.
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