JLT Specialty, a division of global insurance and reinsurance broker JLT Group, has noted continued underwriting discipline in the aviation insurance market so far in 2018, a trend that supports upwards pricing pressure during renewals in a relatively stable marketplace.
After the analysis of second-quarter 2018 market conditions, as well as knowledge of July renewals that have completed or are close to completion, JLT Specialty underlines an aviation insurance market that has “changed little” in the first six months of the year.
The majority of airline renewals, states JLT Specialty, “continue to experience upwards pricing pressure in-line with the on-going underwriting discipline and three-tier market conditions.”
Underwriters in the aviation insurance market remain resilient, and continue to either maintain or increase premiums and have shown resistance to rate reductions, or kept these to single-digit declines, says JLT Specialty.
Despite the increases, the broker notes that some in the space have suggested these aren’t enough, in light of meeting year-end targets, but JLT Specialty says that ultimately, “this position could prove to be more sustainable long-term as opposed to hard-line reactions.”
The broker also notes that, for now at least, aviation market capacity remains generally stable, while some companies, such as WR Berkley, ceased writing airline business entirely, with other firms withdrawing in other segments, such as general aviation.
The broker feels it is likely that further aviation market consolidation takes place, with a number of management teams stating that they are exploring options.
“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,” says the broker.
The majority of aviation insurers have experienced losses so far in 2018, and while the value of total losses has been relatively low, JLT notes that attritional claims have continued to be both frequent and costly.
This is an issue that continues to be a key area of concern for sector underwriters, says JLT.
Looking forward, JLT says: “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.”
