Airline rates expected to soften
Abundant capacity, high levels of competition, limited loss activity and an aggressive broking community will benefit airline insurance buyers renewing in the final quarter of 2013, according to broker Willis.
Consolidation in the airline industry together with the migration of renewal dates to later in the year has created a concentration of renewal activity in the final six weeks of 2013. The sheer volume of renewals and competition at this time of year means that buyers are likely to achieve significant premium reductions.
As well as a sharp rise in the number of programmes renewing in the final quarter, the overall size of programmes has increased. In this respect, a number of the largest airline programmes, both in the US and China, come to market between now and the end of the year.
“Insurers' desire to participate on the world's blue chip airlines will continue to keep competition in this area high,” said Phil Smaje, CEO of Willis Aerospace. “The consolidation that has taken place in recent years has created a smaller number of very large programmes of significant interest to the market.”
Another factor expected to accelerate the slide in premiums is the industry's safety record which, despite some losses, remains good.
Total hull losses in the airline industry to October amounted to approximately $615 million. Meanwhile, liability losses in the same period were of the order of $226 million. Willis estimates that overall insurance losses in the airline sector in 2013 will be $1.2 billion, including a pro-rata estimate of "attritional losses".
“Despite many believing the market couldn't go any lower than it has in recent years, the low loss levels, plentiful capacity and growth in exposures will continue to provide ideal conditions for buyers and challenges for underwriters,” said Smaje.
