Aviation 2011 Results Point to Buyers' Market in 2012

NU Online News Service, March 29, 2:58 p.m. EDT

It’s official. 2011 was one of the best claims years for the aviation-insurance market, and that translates into soft-market conditions continuing into 2012, according to a report released by Aon Risk Solutions.

In the report, “Airline Insurance; Market Outlook 2012; The risk remains,” Simon Knechtli, head of aviation, Aon Risk Solutions, a division of the Chicago-based insurance broker Aon, writes that insurers continue to deploy capital into the aviation market, translating into continuing soft conditions.

However, the insurers “are battling to balance deploying greater appetite against further market softening,” he says.

He goes on to say that “a small minority” has scaled down aviation underwriting and is waiting for conditions more favorable to carriers, but he adds that the majority are still pursuing market share in a very competitive market.

The results of 2011 over 2010 show average premium fell 3 percent while airline-fleet values grew by 8 percent.

Total lead hull and liability premium was $1.82 billion, a drop from 2010’s $1.88 billion.

The final loss figure for 2011, excluding minor losses, is $522 million, a significant reduction from 2010’s $1.59 billion. Factoring in minor losses, total loss was $1.13 billion compared to $2.1 billion for the previous year.

Insurance capacity is expected to remain healthy in 2012, the report declares, and that should mitigate any potential upward pressure from losses during the year. However, Aon warns that prices have probably reached their low point “and the remaining uninvolved capacity has a low appetite for current pricing.”

While 2011 was a profitable year for underwriters, when looking over the past five years, aviation has not been kind to insurers. Historically, loss levels have hovered around $2 billion, so insurers have faced a number of years of unprofitable underwriting.

The insurance industry is also dealing with the realities of mergers and acquisitions within the airline industry, as well as airlines going out of business, which reduces the overall premium pool. Aon estimates that around $232 million of lead hull and liability premium has “disappeared from the insurance market during 2011.”

However, the low number of claims and fatalities in 2011 is a positive for carriers in the industry, with claims down 67 percent and total fatalities worldwide at 175, well below the average of 623 over a 15 year period.    

“The airline industry will rightly broadcast the very positive 2011 as the result of the high levels of investment in technology, quality and safety and industry standards,” says the Aon report.

Those results, suggests Knechtli, mean most airlines can at least count on something not increasing during 2012.

“Airlines can enjoy their insurance premiums being the one area of fixed costs which remains soft and encouragingly negotiable,” says Knechtli.

However, Peter Schmitz, chief executive officer, Aviation, Aon Risk Solutions, notes, “A single year with phenomenally low level of claims does not mean that the next year will be the same, because the level of risk does not change overnight.”

Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Claims Connection eNewsletter

Breaking news on disasters, fraud, legal trends, technology, and CE initiatives for the P&C claim professional – FREE. Sign Up Now!

Claims-Handling Guidelines

Claims Magazine is providing the following free guidelines and regulations in order to help adjusting professionals stay abreast of each state’s unique property and casualty claim-handling requirements.

View our State Guidelines »

Advertisement. Closing in 15 seconds.