July 17, 2013 by Canadian Underwriter
Insurance premiums in the airline market continued their downward direction in the first half of of the year, according to an update from Willis Group.
In its Airline Insight issue for the second quarter, the company reports that premium levels have reduced by 5% in the first half of 2013, or about $13 million being eroded from the overall market premium.
“Meanwhile, the growth in exposures continues to consistently be in the mid-single digits and as a result rating levels continue to decline with average hull rates down 11% and average liability rates per passenger down 13%,” it says. “This has resulted in the overall cost per passenger for insurance falling by 12%.”
“The loss of an Asiana B777 aircraft – which sadly resulted in two fatalities – will do little to alter the downward trend in premium prices in the airline insurance market,” it also notes.
Excluding that event, losses for the first six months of the year are currently estimated to be $488 million, including anticipated attritional losses, according to Willis.
“The low loss levels combined with abundant capacity and growth in exposures continues to provide perfect conditions for buyers and challenges for underwriters, with little sign of a change in any of the market drivers and as a result the downward slide in premiums looks set to continue unabated,” Phil Smaje, CEO of Willis Aerospace noted in a statement.
“In recent years the airline insurance market has seen a number of new entrants bringing additional capacity,” he added.
“This, combined with a series of consecutive years of low frequency and low severity losses, has served to further increase competition and drive premium prices down.
At this point, it is difficult to see how a single catastrophic event could reverse this prolonged period of rate softening.”