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Survey Report

Marketplace Realities 2018: Aerospace


November 7, 2017

The pressure on insurers for bottom line profitability is mounting as we approach the Q4 airline renewal season — which will set the tone for 2018.

Capacity in the aviation market continues to be plentiful, creating positive conditions for buyers. While some insurers are tightening their pricing and may be willing to part ways with buyers if technical rates cannot be achieved, other insurers will likely be willing to step in and fill the void at competitive terms.

  • Airlines. As we approach the busy Q4 airline renewal season, we are facing some uncertainty regarding pricing direction. The natural disasters over recent weeks are not likely to have an immediate impact on aviation insurers but will be an issue for the broader property and casualty market at some point. Underwriters who write broad portfolios across the P&C sector have hinted that they must now hold the line on pricing.
    • Worldwide aviation and airline losses have been relatively low, and there is still plenty of excess capacity. However, worldwide airline attritional claims have exceeded premiums for the last four years. Underwriters are not eager to offer reductions but have been hamstrung in seeking increases due to the excess capacity.
    • The available capacity remains divided, with less capacity for legacy operators flying wide-body equipment.
  • Product manufacturers/service providers. This segment continues to remain in soft market mode with plentiful capacity from both domestic and international insurers. Despite large recent losses related to grounding liability claims, appetite remains strong for core aviation products and service provider business, with component product manufacturers remaining particularly attractive to insurers. However, we see some signs of market resolve.
  • Airports and municipalities. Pricing remains relatively flat, with occasional reductions to retain business or gain market share. Retentions continue to hover at all-time lows, and attractive multi-year contracts are popular in the market. Current conditions are not likely to change due to an abundance of capacity. New capacity has recently entered the U.S. market and will drive competition among traditional insurers.
  • General aviation. While the industrial fixed-wing aviation subsector continues to experience small pricing reductions, the already depressed rates are making those reductions less common. The charter fixed-wing market, on the other hand, has seen less flexibility in pricing due to premiums being at attritional loss levels. Rate reductions in the rotor-wing subsector continue for profitable accounts, but rate increases are sought for accounts with unfavorable loss ratios. Regardless, underwriters continue to aggressively approach new business to compensate for the low rates on their renewal books and capacity is still abundant.
  • Financial institution/lessors. New and used aircraft transactions are increasing with the global upturn in air travel, and fleet transaction activity is growing and evolving. Insurance for aircraft lessors, banks and trading groups is readily available, with broad coverage and competitive markets willing to charge attractive rates for this profitable class of aviation business.
  • Space. The satellite insurance market (for launch and in-orbit risks) has seen more than a decade of positive underwriting results, which keeps attracting significant market capacity and driving down premium rates. There is, however, substantial differentiation between the best-performing launch vehicles and those with recent performance issues. For in- orbit risks of healthy satellites, one-year policies are at historical lows, with standard GEO satellites now attracting premium rates in the region of 0.5% or less. For pre-launch risks, the market remains challenging due to a launch pad explosion that took place in September 2016.

Price prediction

-5% to +5%

Product manufacturers/service providers
-10% to flat

Airports and municipalities
-5% to flat

General aviation
-5% to flat

Financial institutions/lessors
-20% to flat

Title File Type File Size
Marketplace Realities 2018 PDF 5.9 MB
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