Aviation Market Flies Under
Radar of ‘Hardening’ Market
Ample capacity, positive loss trend, industry consolidation signal a continued soft market
BY MARK E. RUQUET
AT THE BEGINNING of 2011, Aviation insurance brokers fully expected to see a move
toward a hardening market over the
course of the year. Instead, the line
produced a year of pricing decreases—and no one is anticipating any
big jumps in 2012.
“Unless there is a significant
event in terms of reduced capacity
or a major disaster, we do not see
any drivers of rate increases in 2012,”
says Peter Schmitz, CEO of Aon Risk
Solutions Global Aviation Specialty.
“The main driver of rates is an
individual airline’s book of business.”
Recent renewal premiums ranged from
flat to down 10 percent, says Schmitz.
Jeff Bauer, president of NationAir
Aviation Insurance, shares the view that
it’s unlikely rates will take off in 2012.
“If an account is particularly desirable [to
an insurer], then maybe we’ll even see a
decrease,” he says.
Three factors conspired to keep Aviation
prices from gaining altitude last year. One
was losses: 2011 turned out to be one of
the safest years in recent aviation history,
with no significant loss of life.
In early December Aon released a report
saying that there were a total of 175 lives lost
covered under Standard-Liability policies;
hardening is ample capacity. Insurers
are attracted by the industry’s positive
loss-trend results and by their desire
to diversify their portfolios with solid-performing risks.
Schmitz says there is nothing to
indicate that capacity will decrease.
In fact, some underwriters may
increase their capacity.
Weyman notes that the only
scenario he sees for a change in
the market is if there is economic
turmoil or a substantial natural
catastrophe that forces carriers to
withdraw their available capacity to
redeploy it elsewhere. “We’re not
seeing any significant capacity issues in the
next 12 months,” he says.
A third reason for premium decreases
is the consolidation of the airline market.
The reduction in the number of carriers
is also reducing the premium base for
carriers to draw from. That means,
for especially desirable risks, intense
competition to get that business into an
Although the total figures for 2011 are
still preliminary, Doyle says fleet numbers
for the year were up 6 percent while
passenger numbers rose by 8 percent.
However, despite these increases, overall
premium volume fell by 2 percent—a sure
sign of a soft market. NU
AVIATION INSURANCE NET PREMIUM
(HULL AND LIABILITY)
$29.71 $33.79 13. 7
$241.62 $240.06 -0.6
$306.8 $304.24 -0.8
$122.12 $113.39 - 7.1
$700.25 $691.49 -1.3
the long-term average is 582 fatalities.
It was the first time since 1995 that by Dec.
1 the number of fatalities was under 300.
“2011 was great in terms of safety,” says
Steve Doyle, business development and
sales director for Aerospace Willis Group.
“If the loss trend continues, it will
be hard for underwriters to substantiate
any rate increases even though they are
selling [insurance] below costs,” says
Nigel Weyman, chairman of Jardine Lloyd
“If there is an absence of a major loss
during the first half of the year, the pressure
will be on underwriters to give away more
[premium] growth,” Weyman adds.
The second factor keeping the market from
Rates Are Flat Across General Aviation—Except for Helicopters
Where there is some price sensitivity, how-
ever, is in coverage for helicopters, where rates
are firmer and capacity is less than for other
The reason for this is there is greater “loss
sensitivity” with helicopters than with other
“Those rates are firmer than a corporate
fleet; we’re not seeing decreases,” says Bauer.
“But we’re not getting huge increases either. It
is still minimal.”
Peter Schmitz, CEO of Aon Risk Solutions
Global Aviation Specialty, notes there are
about 30 insurers in London and the United
States that write General Aviation business.
When you add in reinsurers, Lloyd’s syndicates
and other local markets, that number rises to
Bauer points out that Australia-based QBE
and Swiss Re entered the space at the begin-
ning of last year, adding more capacity to the
U.S. marketplace. NU
BY MARK E. RUQUET
BROKERS SAY THAT pricing condi- tions in the General Aviation mar- ket, which covers everything from
propeller-driven planes to corporate fleets,
range from flat to some buyers seeing some
Jeff Bauer, president of Chicago-based
NationAir Aviation Insurance, a brokerage that
specializes in Aviation insurance, says capac-
ity remains ample.