Bizav insurance rates falling?
Business aircraft and large charter operators may start seeing reduced insurance premium rates within the next few months, if they haven’t already. According to various brokers, insurance premiums for certain segments of the business aircraft and charter market have fallen by 25 percent or more in the past six to 12 months.
“With respect to corporate aviation, we’ve seen average reductions in premiums of about 25 percent,” said Jeff Bauer, president of St. Louis-based NationAir Insurance Agencies. “Charter operators who fly all turbine or primarily turbine aircraft with just a few turboprops are also seeing some good decreases.”
Larry Mattiello, president of Addison, Texas-based Aero Insurance, alerted clients to the good news in the brokerage’s monthly newsletter. “For corporately maintained aircraft and well managed charter operations, premium reductions of as much as 25 percent have been noted,” Mattiello wrote.
The news may come as a relief to aircraft operators who have seen premiums soar since 9/11. Losses from the World Trade Center, Pentagon and Pennsylvania attacks totaled an estimated $32.5 billion, according to figures released by the Insurance Information Institute. Even before then, insurance executives were calling for higher premium rates, citing only two industry-wide profitable years since 1987, six straight years of losses and low returns on capital due to a soft stock market.
“I have often likened the aviation underwriter market to the stock market and when the market was undervalued, corrections were required,” Mattiello wrote. “Indications are becoming more evident that we have passed that phase and are seeing some competitive forces freshening the market once again.”
The competitive forces Mattiello referred to could include the relatively recent entry of Phoenix Aviation Managers, a member of Old Republic International Group based in Chicago, as a new underwriter for business aviation. Though it has been underwriting airports, helicopters and other specialized niches of the aviation market for more than a decade, Phoenix Aviation Managers didn’t start underwriting business aviation operations until 2002. There are only seven other insurance companies underwriting aviation-related policies in the U.S.
“Insurance business is cyclical,” Bauer said. “If rates get high in an area of business, more underwriters will go after that business. They’re willing to accept lower rates to increase their market share.”
Not all operators are seeing reductions. Bauer said that small one-aircraft corporate operators and charter companies with piston twins are not likely to see the best rates. And AIG Aviation isn’t reporting a reduction trend at all.
“I’ve talked to a number of our underwriters, and they’re not seeing any great increases or decreases in rates,” said Jeff Novak, marketing director for Atlanta-based AIG.
Novak said that corporate aviation doesn’t usually incur significant losses, and that rate increases or decreases would effect a shift in the marketplace, such as what happened after 9/11. “We don’t see anything on the horizon that would affect rates,” he added.