Speaking to The Insurer TV in a wide-ranging interview in the latest Close Quarter episode, Bill Smith, Gallagher Aerospace’s global executive, said underwriters of the class were “currently charging about double the price, in terms of rate that they charged in this time last year” with this trend expected to continue on an upward trajectory.
“The whole war market has responded quite vigorously. And they are currently charging about double the price, in terms of rate that they charged this time last year,” Smith explained.
“There are rumblings of that having to be a larger percentage,” he said.
“And we would probably expect that level to possibly accelerate.”
As this publication has reported, airlines including one of the world’s largest airlines – Emirates – saw its hull war cover renew with a 100 percent premium increase in May.
“We’re saying to clients, you do need to budget for significant increases,” Smith said.
In addition to pricing, Smith noted that carriers have been tightening hull war policy conditions.
Comparatively to hull war, Smith noted that insurer appetite for all-risk cover remained plentiful, with supply currently outpacing demand.
“There is increased supply from the insurance markets – there are more insurers wanting to write the risks, particularly the best risks, than we actually need, which is very good for clients,” Smith said.
One new entrant has been Lancashire, who earlier this month this publication would be in a position to enter the all-important fourth quarter airline renewals after hiring experienced Chubb aviation underwriter Angus Roberts.
Lancashire isn’t alone in looking to take advantage of the hardening rating environment in the airline market.
Everest Re has announced plans to enter the aviation class and start writing airline as well as general aviation and aerospace risks from the fourth quarter.
Smith said the new entrants and increased appetites from carriers had created a marketplace where brokers can negotiate and use “their skill sets to get the very best job done”.
“There is new capacity coming in because they see that opportunity – they see that opportunity to make money in all-risk.”
Smith highlighted that the past three years have been marked by a differentiated approach whereby carriers would impose rates based on the level of riskiness of the individual client.
This means that clients with higher loss records could be forced to pay more for the same risks compared with peers with smaller losses.
“Losses have been relatively benign over the last two years. But because nobody has been flying, and the reduction in attritional loss has been significant, We haven’t seen any significant loss of life, causing significant liability payment payments. So the market has benefited from that,” he noted.
Smith continued: “As insurers have made profits in 2022, on a calendar year basis, all of our clients are returning to flight and therefore their exposures – numbers of passengers, number of departures – they’re going up quite significantly.
“And where you have a client whose exposures are going up, that will enable the broker to negotiate on the rating basis, albeit ultimately the premium may be slightly more than it was in the prior year. But the call rates, the technical rates are probably coming down.”
Watch the 18-minute interview with Gallagher’s Bill Smith to hear more on:
The continued impact of the Russia-Ukraine conflict on the aviation market
Impact of “returning to flight” post Covid-19
How changing reinsurance appetite will impact primary renewals
Social inflation and “nuclear verdicts”