Despite an estimated $535 million overage in aviation insurance claims this year stemming from the recent spate of foreign airline accidents (including two fatal crashes involving Malaysia Airlines Boeing 777s), Corporate Aviation Insurance Group president Matt Drummelsmith doesn’t expect any effect on insurance premiums for U.S.-based aircraft operators.
Types of insurance
In the wake of recent airliner losses, carriers are bracing for substantial increases in insurance premiums when the main renewals season starts on November 1. Insurers have already made massive payouts for hull losses following the disappearance of Malaysia Airlines flight MH370 en route to Beijing and the apparent shooting down of MH17 over eastern Ukraine. Other recent losses have included the crash of Air Algerie’s flight AH5017 in southern Mali and TransAsia Airways flight GE222 in Taiwan. Further unsettling the risk environment for air transport have been recent attacks on airports in Pakistan, Israel, Afghanistan and Libya.
The Middle East Business Aviation Association (MEBAA) expanded its aviation insurance program (MAIS) to include coverage for MROs, pilots, ground handlers, refuelers, fuel sales agents and other industry stakeholders. The association launched the aviation insurance group discount program for operators at the 2011 Dubai Airshow.
As the softness of the aviation insurance market continues to drive premiums down, aviation insurance underwriters, brokers and agents are struggling to make money. In fact, when asked how much lower premiums could fall before they hit bottom, Aviation Insurance Association (AIA) president Franklin Bass told AIN, “I thought we were there last year.”
Product liability insurance isn’t your everyday policy. “Without experience in aviation law, regulations and coverages, generalist insurers don’t understand the risks,” explained Jaime Benthusen, product liability director for NationAir Aviation Insurance (Booth No. 5105). Benthusen was on hand at Heli-Expo 2014 to introduce the company’s product liability coverage and risk assessments for rotor-wing aftermarket parts firms.
Last year marked another year of relatively soft rates in the general aviation insurance market, according to aviation insurance broker NationAir’s annual market analysis, released yesterday. “While the market conditions have remained the same for several years, the reasons for that soft market are changing,” noted company president Jeff Bauer.
Initially, increased market competition pushed rates down, he said. “Now, however, rates are being held down by the more long-term forces of structural overcapacity and, thankfully, favorable loss history.”
Bill Snead, president of Wichita-based AOPA Insurance (Booth No. C10424)–a wholly-owned subsidiary of the Aircraft Owners and Pilots Association–put it most succinctly when he presented the company’s new options to members at NBAA 2013. “FBOs are our primary targets with our new commercial insurance offering. Beyond that, we are ready to insure corporate flight departments to a very high limit of liability,” he told AIN. “We know we can offer competitive rates, and that’s exciting.”
The Independent Fixed Base Operators Association (Ifboa) announced last month that it has now surpassed the 500-member-company mark. Founded in 2006, the group includes FBO operators, flight schools, repair stations and aircraft management and sales firms among its ranks.
Airlines may still be struggling with rising costs associated with factors such as fuel and taxes, but they are winners when it comes to insurance premiums. New data released by insurance broker Willis shows that premiums have continued to fall this year. “The balance of power in airline insurance purchasing remains firmly in favor of the buyers,” concludes the London-based group in the second-quarter edition of its Airline Insight report released on July 15.
There has hardly been a better time to be a buyer of aviation insurance, as all signs point to a buyer’s market. Several factors are driving lower rates in this insurance segment, including fewer airline accidents, lower overall insurance claims, the economy, more underwriters entering the market, increased adoption of safety management systems and more sophisticated aircraft. AIN talked to David McKay, president and CEO of insurer USAIG, to get a better sense of this market. USAIG and McKay are here at the Paris Air Show supporting long-time customer Bombardier.
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