Following a quiet start to the year, the second quarter picked up the pace and brought the first real assortment of major renewals to the market.
From our analysis of the second quarter, and our knowledge of forthcoming July renewals that have concluded or are in the final stages of completion, all indications suggest that the aviation insurance market has changed little in the first half of 2018.
Most airline renewals continue to experience upwards pricing pressure in-line with the on-going underwriting discipline and three-tier market conditions. Underwriters remain resilient, maintaining or increasing premiums and resisting rate reductions, or at least limiting them to single-digits.
Some underwriters would suggest that this upwards momentum has not been enough, mindful of meeting year end management expectations, but ultimately this position could prove to be more sustainable long-term as opposed to hard-line reactions.
In terms of capacity, the market is generally stable, at least for now. In recent months we have observed further market personnel moves, staff consultations and another market (WR Berkley) has ceased writing airline business altogether. We have also seen withdrawals in other sectors including general aviation.
Industry consolidation remains a hot topic of market conversation and it would seem likely that further activity can be expected, following recent announcements by the owners/shareholders of MSF Pritchard, Chaucer, Starstone and Atrium that they are exploring their options in respect of the future of these businesses.
While at present these factors have had no initial effect we would anticipate some change in future dynamics and capacity levels in the coming months. It remains too early to predict just what this will be, but 2018 could prove to be a pivotal year for many companies and syndicates.
In terms of losses, most aviation insurers have been hit by airline losses in 2018. Of these, while the value of total losses has been relatively low, attritional claims have continued to be frequent and expensive. This issue remains a prominent area of concern to underwriters. Airline losses aside, there has also been some significant losses in other sectors such as general aviation and aerospace infrastructure.
So what can we expect for the rest of 2018?
While factors such as industry consolidation and major losses have the potential to cause volatility, our view in the short term is that market conditions will remain stable, albeit fragile. We expect that renewal negotiations will remain challenging and underwriters will be determined to hold their position as we grow closer to the markets key income renewal period.
For more information, please contact Steven Godfrey, Aviation National Specialty Leader, Managing Director at ClientFirst@jltcanada.com.