Aviation Market Update | Q2 2022

Property & Casualty

Aviation Market Update | Q2 2022

From an insurance perspective, market conditions across all aviation segments are showing signs of improvement as COVID-19 recedes, leading to a more favorable environment for customers in 2022. From 2020 through the end of 2021, more than 30 worldwide losses were categorized as major events, resulting in a loss in excess of $1M. Additional awards exceeded $100M. The attritional and catastrophic losses are unfortunately continuing into the beginning of 2022. 

While premium increases have plateaued after four years of consistent rising rates, the recurring losses are stifling rate relief. However, rate adequacy and underwriting profit in the aviation sector is leading insurers to focus on capacity. Insurers are under pressure to retain their share on complex and vertical placements as new entrants present themselves to market. Insurers such as Applied Underwriters, a new Domestic U.S. Aviation insurer, and Rokstone, internationally in the London market, are adding new pressure to existing insurers. 

The following areas of focus are key to a successful renewal strategy: 

  • Early engagement with your broker
  • Detailed underwriting information
  • Restructuring a program
  • Engaging virtually
  • Exploring retention/limit combinations

While premium increases are still consistent on most aviation renewals, insureds that outline clear underwriting information and details of their risk and consistent safety management directives are receiving the most competitive rates as capacity levels increase. 

For aircraft risks, insurers are focused on adequate insured values to verify that depreciation has been accounted for and that values are kept in check during this competitive used and new aircraft market. Aviation manufacturers, airports, drones and workers’ compensation products continue to be the most competitively priced risks. Owner-flown turbine aircraft and rotor-wing placements continue to be the more challenging placements. 

It is strongly anticipated that the second and third quarters of 2022 will remain favorable and consistent for insureds as competition for good business continues to grow. Uncertainty lies on the horizon as the impact of the Russian invasion of Ukraine leaves more than five hundred western-built aircraft, totaling more than $13B in value, on the ground at Russian airports. The majority of these aircraft are owned by European companies, which, if they are unable to recover, could result in the largest potential loss to the aviation war hull market since 9/11. Confiscation by a foreign government is a peril typically outlined under war hull coverage. 

The world’s top aircraft lessor, AerCap, reported in early April 2022 that it had submitted a $3.5 billion insurance claim for more than 100 jets stranded in Russia, the largest exposure in the sector. Lessors of commercial aircraft are already seeing significant rate hikes in the cost of renewing policies out of the London market, and this could trickle down to the domestic U.S. market later this year and prolong the hardening of the market.  

Aviation Team