High levels of capacity and a low frequency of claims means airline premiums will continue on a downward trend – Willis

Airline insurance buyers renewing in the final quarter of 2013 could expect the downward pressure on premiums to continue according to Willis Aerospace chief commercial officer Steve Doyle.

Speaking to StrategicRISK, Doyle said: “If the trend on losses continues and the capacity stays in the market, then there would be little to halt the downward direction of the market so it’s a question of how steep that downward trend remains.”

Willis’s latest issue of Airline Insight revealed total hull losses in the airline industry to October amounted to approximately US$615m. Meanwhile, liability losses in the same period were of the order of US$226m.

Willis estimates that overall insurance losses in the airline sector in 2013 will be US$1.2bn, including a pro-rata estimate of “attritional losses”.

The report said abundant capacity, high levels of competition, limited loss activity and an aggressive broking community will benefit airline insurance buyers renewing in the final quarter of 2013.

“If the year continues without any further significant losses – and there can be no guarantee of that – then 2013 could still yet turn out to be one of the best years for the market,” it stated.

Willis Aerospace chief executive Phil Smaje commented: “Despite many believing the market couldn’t go any lower than it has in recent years, the low loss levels, plentiful capacity and growth in exposures will continue to provide ideal conditions for buyers and challenges for underwriters.”

The long-term stability of the aviation market is relatively secure and Doyle believes it would take an incident removed from the aviation sector to cause a turn in the downward pressure on airline premiums.

He said: “Aviation is a catastrophe market, it is increasingly predictable, brings diversity to an insurance portfolio and it’s a nice part of the portfolio to have bringing balance because it doesn’t aggregate with other classes of insurance. So, for the market to turn, it would unlikely be an aviation isolated event.”