The 2022/2023 aerospace reinsurance renewals season is a chance to re-set retention levels, policy conditions and pricing levels to enable the global aerospace (GA) insurance market to continue to serve its end-user client base, according to Gallagher analysts.
This opportunity presents itself as this renewals season for the global insurance market has been specifically affected by the conflict in Ukraine, the on-set of a global economy recession and rising inflationary costs unparalleled over the past 40 years, Gallagher noted in its Plane Talking Q4 edition.
The reinsurance broker said that the diversity of the underwriters’ GA risk portfolios helps provide many direct insurers with a natural spread of risks which continues to be attractive to insurers.
Despite this, Gallagher warns, pressure on improving their margins is inevitably forcing many of them to scrutinise and re-calibrate their GA pricing models, while they are also impacted by external global headwinds.
Inflation continues to be the top concern for insurers, according to a recent report by Swiss Re. It is challenging to insurers, analysts explain, because “it erodes nominal premium growth, impacts global demand and creates higher claims costs”.
“In a sector heavily dependent on specialist materials such as composites and high value aerospace engineering skills, rising claims costs will be a major concern for GA insurers,” Gallagher analysts said. “Add to these pressures the general rise in social inflation and global supply chain issues and it is easy to understand why many GA insurers are pressing for premium rate increases.”
Regarding the Russia-Ukraine conflict, Gallagher noted that the situation has not affected the General Aviation sector in the same way as it has impacted commercial passenger services and the commercial passenger aircraft leasing sector.
Despite this, the consequences of this conflict will inevitably influence all Aerospace insurance providers, analysts warned.
“With the onset of legal proceedings just beginning to address the complex leasing issues and policy coverage, every prudent insurer and reinsurer is reviewing their loss reserves,” analysts added.
Additionally, analysts also noted that, while there are many external factors to consider, GA insurers continue to place great importance in proven operational management expertise and safety management systems and culture.
Gallagher said: “As the global aerospace emerged from the most dramatic shut-down in the industry in history, there were considerable concerns around skill-fade and lack of currency. Those GA operators with robust management and SMS were more able to meet the immediate and continuing upswing in demand for services across most GA sectors.
“Investments in safety and training by any GA operator continues to pay dividends when negotiating with insurers as the survival of the operationally fittest GA businesses will be a long term structural benefit to the industry and the supporting insurance sector.”