Prices are expected to continue to reduce for airline insurance buyers, attracting more capacity to the market
Airline insurance prices will continue to decrease despite estimated total claims outweighing the total global lead hull and liability premium, according to Aon’s Airline Insurance Market Outlook 2014.
The report finds that total global lead hull and liability premium for 2013-14 airline placements was about €1.01bn, but this was outweighed by the estimated €1.08bn of claims for the period.
Despite this imbalance, the report suggests prices are likely to continue to decrease in the short term because the losses in 2013 were relatively few and involved the lowest number of fatalities since 1995. As a result, insurance capacity continues to be attracted to the sector.
Competition is likely to remain healthy for 2014-15 insurance programs, although should further major incidents happen, market conditions could change.
Although information is still limited about the missing Malaysia Airlines flight 370, the aircraft obviously carried more passengers than the total global number of airline fatalities in 2013, which further highlights the potential for catastrophic loss that the airline sector will always represent.
At this early stage of the year, Aon says it is unlikely flight MH370’s disappearance will be a catalyst for a shift in current market conditions, however, should there be another large loss or a string of losses, this could change.
Aon Risk Solutions aviation and space practice leader Mike Smith said: “Although it may seem like a contradiction that exposures are rising at the same time as insurance prices falling, the introduction of the new generation aircraft a couple of years ago means that airlines of all sizes now have access to relatively modern fleet replacement options.
“These aircraft are more expensive but represent a risk reduction because they are safer and prices in the insurance market reflect this. At the same time, the aviation industry continues to improve technology and working practices, again driving down the price of risk.
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