December 16, 2008 by Canadian Underwriter
The airline insurance market is showing sure signs of hardening, with premiums increasing 16% through the month of November, despite the fact that the line has not experienced any significant recent losses, reports Willis Group Holdings.
In its report, Airline Insurance Insight, Willis notes insurers are seeking and achieving rate increases in an environment of relatively benign loss levels and overcapacity, which would normally be expected to favour rate reductions.
“The principle factors leading to the hardening market,” the report said, “are insurers controlling the deployment of capacity as part of their strategy to manage the market cycle, and capital providers increasing their demands for better returns against the backdrop of the global financial crisis.”
The Willis report notes the airline insurance market saw 18 renewals in November. Despite only having four more renewals than October, due to the size of the programs, November generated nearly four times the premium than the previous month.
The total premium generated to date in 2008, including known December renewals, has been US$1.233 billion, an increase of 9% over 2007, a Willis release says.
This is despite the fact that growth has been slowed by the absence of carriers that ceased operations in 2008.
A continuing hardening of rates could mean that gross premium for 2008 will exceed US$2 billion, driven by major renewal activity in December. By comparison gross premium for 2007 was US$1.83 billion, Willis notes.