Ed Louth, GB Head of Broking, Global Aviation & Space, discusses the current market conditions for the Aviation industry and what clients can expect in the final quarter of this year.
Transcript:
Aviation & Space market trends
0:06
Welcome to WTW's Global Marketplace Insights series, where our
experts bring you the latest risk and insurance perspectives.
0:20
Hello, I'm Ed Louth, I'm the Head of the Broking team for
Aviation and I'm here to deliver a quarterly update on market
conditions and what to expect in the final quarter of this
year.
0:30
And I'm going to split this into two parts.
0:32
We're going to talk about the all risk market and we're
then going to go and talk about war capacity.
0:38
From an all risk perspective, everything's looking good.
0:41
It's been a great year for safety touching wood.
0:45
Accidents are at, you know, record levels and the industry has had
a great performance from a safety perspective.
0:52
That means most underwriters are looking at a profitable year and
that has drawn capacity into the market, which means you as a buyer
have a lot of choice.
1:03
There is plenty of appetite in the market for new business and
generally speaking we're seeing clients come to the market with
small exposure growth and they're being able to generate rate
reductions.
1:16
From a positive perspective, we think that this is going to
continue through to the end of the year.
1:22
The big cloud on the horizon from an all risk perspective and also
from the war perspective is what's going on in Russia.
1:29
But recently there has been some positive news in the press around
air cap and the Russian government reaching a settlement for some
of the aircraft which have been detained.
1:39
This is only adding to a sense of optimism and a sense of
positivity from underwriters.
1:45
And I think through to the end of the year is going to be a good
time to buy aviation insurance.
1:50
As always, come to the market prepared, present the information in
the right way and rely upon your broker and the relationships to
drive the deal.
1:59
But this should be good news for most clients, we think in the
final quarter. War insurance has been much more challenging all
year and even into last year we've seen significant increases
and for most clients we're now talking about year over year
increases which are compounding.
2:18
War capacity is reduced.
2:19
We have fewer options available and the options that we do have of
tended to be expensive.
2:26
We've also seen coverage restrictions over the last 18
months.
2:31
Fortunately, they seem to have subsided.
2:33
I think the market have taken the corrective action that they feel
they needed on the war policies and it's really just a pricing
game now.
2:42
Earlier in the year, we were really advising clients that the
market were looking for rate change in the region of 75 to
100%.
2:50
I think our feeling is that a little bit of steam has come out of
that.
2:54
There have been some deals that have gone through a 60% rate change
in the last few months and I think certainly going through to the
end of the year, we suspect that the rating increases will soften
slightly from there as well.
3:09
It is dependent, there are some risks which are going to be more
challenging than others.
3:14
Anybody who needs to buy large capacity is going to find it more
expensive because really there is a lack of capacity for people
buying the top limits and certain parts of the world have become
quite problematic this year.
3:28
One of the big changes that we've seen is that a lot of war
insurers are now running an aggregated level of exposure to certain
regions or certain countries.
3:38
So some clients have found it quite difficult to buy that capacity
because underwriters have filled up their allowance or their limit
with other renewals which have happened earlier in the year.
3:50
So I think talking to your broker is going to be the best
advice.
3:53
Really we need to be looking at your situation, who you are, where
you fly and what the geopolitical tensions are around where you
based.
4:02
All of these are going to be taken into account and there will be
some differentiation from the market, but I think there's also
positives there as well.
4:10
I think for the bigger clients in the more stable environments, I
think they will be able to cut a better deal than they did earlier
in the year and the increases will be less than they paid last
year, albeit war insurance is becoming much more expensive.
4:27
Again, I think the news coming out of Russia in terms of some of
those settlements can only be a positive.
4:32
The market has begun to price as though they were paying that claim
and it now appears as though there may be some chance, even if
it's a partial chance of a settlement being made without a
contribution from insurers.
4:47
So again, come to the market early, rely upon your relationships,
have a clear story and a clear message for the market and talk to
your broker, seek advice and we're confident that we'll be
able to get some good deals across the line in the final quarter
and who knows what next year will bring.
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