Aviation rates continue to stabilise with conditions “more positive” for buyers in 2021 than they have been for some time, as insurers shift tone towards “maintaining income” by setting prices at 2020 levels or just above, according to A J Gallagher. The broker expects further deceleration in general aviation rates, barring any major loss event.
In the latest edition of its Plane Talking risk bulletin, the broker says rates started to stabilise for airlines in the first quarter of 2021 with signs of deceleration, and pushed through into the second quarter.
“Rate increases are now moving from double-digit territory closer to high single-digits,” said Nigel Weyman, global executive for Gallagher Aerospace. He added that the “right” risks are seeing the lowest rate increases, while reduced exposures are winning some airlines premium reductions below the stated policy minimum.
“With the airline industry’s recovery proving slower than anticipated, insurers recognise the need to continue to apply a tailored response in terms of both requests for premium relief and renewal pricing,” Mr Weyman said. But he stressed that renewals are still very much case by case.
Capacity for airline risks was up in the second quarter, with several new entrants and dormant capacity encouraged back to the market by more sustainable pricing and low loss levels during the past year, Mr Weyman said.
“Increased capacity is a key factor in the recent deceleration of rate increases,” although the proof of the pudding will come towards the end of the year as airline renewals pick up, he added.
Rate rises across general aviation have also eased off in the second quarter, with a more positive outlook for buyers for the rest of 2021, according to A J Gallagher. Its bulletin says rate increases during the past few years have returned underwriters to more profitable levels, with insurers now happier that prices are sustainable and capacity is returning to help buyers.
Gallagher says new capacity in general aviation via Helvetia and Blenheim has been coupled with greater appetite from existing insurers, although carriers have maintained strict risk selection with capacity lower for larger hull values and higher liability limits.
“For the perceived ‘right’ risk, however, there is a ‘fight for quality’ and many insurers will now look to deploy larger shares at competitive terms,” said Matthew Trundle, divisional director at Gallagher Aerospace.
“There is continued optimism that the general aviation market is now over the worst and subject to no major losses; we would expect this trend to continue throughout the coming months,” Mr Trundle said.