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An overview of the General Aviation insurance market

Aerospace
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By Martin Collins | June 11, 2020

A review of the impacts of soft markets conditions, the losses within the industry and the support brokers can provide.

As we approach the half way point of 2020, the general aviation insurance market has seen some dramatic changes as to how insurers are now pricing their business, when compared to how this business has been priced in recent years.

Throughout 2018 and into 2019 many insurers that had been actively underwriting aviation business, were shut down as a consequence of their past results

After the disastrous 2017 year for the (re) insurance industry, on the back of three large windstorm events (Harvey, Irma and Maria) Insurance companies began looking more closely at individual lines of Insurance. It was quickly recognised that many lines, were no longer profitable, aviation was considered to be unprofitable and general aviation was certainly one of the poorer performing, sub sectors. Lloyds results for general aviation over the years 2014 to 2018 were showing that the market (as an average) had lost money in each and every one of these years. Throughout 2018 and into 2019 many insurers that had been actively underwriting aviation business, were shut down as a consequence of their past results.

As we moved into the 2nd half of 2019, rate increases were accelerating and underwriters who had only a few years earlier, been competing with each other for market share in the corporate jet book, now wanted to reduce their market share. Rates had fallen in this sector for many years and coverages had become more generous year after year.

Now, underwriters were looking to increase their pricing and to reduce the levels of additional coverage that had crept into the placements over the past years. Another area that underwriters needed to change, was to reduce the acquisition costs. Acquisition costs would include, lay up returns / risk management bursaries / profit commissions, all of which, were reducing the amount of premium, that underwriters booked at inception of a policy.

Most operators of corporate jets, over the past six months, will have seen their pricing structures increase and the levels of additional coverages, will have reduced, as the market looks to try and reflate this sector, of their general aviation book.

The corporate jet sector is now facing the additional pressures, of the COVID-19 emergency

The corporate jet sector is now facing the additional pressures, of the COVID-19 emergency. We have seen a lot of operators, that have been forced to vastly reduce their flying hours, over the past number of weeks and many aircraft have become temporarily grounded over this period. Most of the larger operators will have lay up provisions contained in their placement and will at least have the ability to receive an adjustment on their premiums, at the expiry date, others will be asking for some mid term assistance from their brokers and insurers, to help them through this period of reduced flying.

Willis Towers Watson are in the process of sending bulletins / Advice letters to our clients, as we look to engage with insurers on your behalf, to seek assistance from your insurers, through what is likely to be a difficult period ahead.

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