Favourable aviation insurance market for now, says WTW

But buyers should be wary of transient capacity

The rising price of airline insurance has attracted capacity back to the airline insurance market, creating competition and the opportunity for negotiation, according to WTW. But the broker said buyers “would be wise to be wary of transient capacity”.

In its Airline Insurance Market Renewal Outlook: Q2 2024, the broker said: “As the second quarter of 2024 continues, the airline insurance market is as pure a supply/demand model as it ever has been.” It said in the absence of a major claim, the short-term outlook is broadly favourable for insurance buyers.

WTW said concerns over heightened risk as airspace reopened and airline operators got their fleets back into the air following the Covid-19 pandemic, together with uncertainty about the aircraft leased to Russia, drove hull and liability insurance rates up during 2022 and 2023.

But greater clarity over the Russian claims and the fact that throughout the period, claims have been around historic averages, together with the higher prices, has generated competition for inclusion on well-managed airline insurance programmes.

However, WTW stressed that a “balanced approach is key to ensuring that an insurance programme does not become too exposed to transient capacity, which can be attractive in the short term but quickly move on as the market cycle goes around. It is important to focus on long-term value, no matter how seductive short-term, transient, capacity may be.”

There is no question that the wider aviation insurance and reinsurance markets face considerable challenges, but the airline hull and liability insurance market has been relatively unscathed up to this point, said WTW.

“In general, we are seeing a return to positive differentiation from insurers towards their airline customers, which means that airline insurance programmes with good claims performance are tending to enjoy a positive reception from insurers. Naturally, those with less favourable track records may face more robust negotiations, but there is some leeway if relationships are good and there is a clear explanation about the risk management strategies that have been put in place to reduce the possibility of similar incidents being repeated. This underscores the benefits of having stable relationships with risk partners,” said the broker.

WTW noted that the long-term market outlook remains challenging, and while the current competition among insurers is welcome, “insurance buyers should be alive to the potential for the market to deteriorate pending the outcome of the legal proceedings surrounding the leased aircraft in Russia. In the meantime, until clarity is reached and assuming that there are no major aviation insurance claims, competition among insurers is expected to continue.”

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