LRingeisen
Well Known Member
Keeping with the theme of our recent posts, we wanted to continue keeping you informed on what is going on with the insurance market. Below is a letter written earlier this year from Jeff Bauer, Area Chairman for Gallagher Aviation.
In the first two months of this year, Gallagher Aviation met with management of the largest insurers of light aircraft. Several common themes emerged from these meetings.
There is a definite effort by all the markets to increase rates. I say ?effort? because, unlike other segments of the aviation marketplace such as corporate and commercial aviation, there are more markets in the light aircraft segment, so it is somewhat more difficult to successfully raise rates due to the level of competition Therefore, several markets reported that they only received small single-digit rate increases in the first two months of the year, due to competitive pressures.
The downside of what would otherwise be positive news for owners of light aircraft is that many of the insurers are reporting only marginal profits in the light aircraft segment. This is in contrast to commercial and corporate aviation, where double-digit rate increases are resulting in sharply increased revenue for the underwriters. These markets have been able to hold double-digit increases for corporate and commercial accounts in part due to a number of eight figure jury verdicts or settlements in this space over the last 18 months. These large losses have affected all the markets, and thus stiffened their resolve to hold to higher rate increases to recoup their losses.
We do feel that continued marginal profits in light aircraft could result in markets reconsidering their commitment to this segment, perhaps not leaving the market, but instead becoming less aggressive and willing to offer reasonable terms. Fortunately, aviation insurers have traditionally favored the light aircraft segment because the relatively low aircraft values and liability limits vs. corporate or commercial aircraft limits their overall exposure to large losses. Also, given the large number of light aircraft vs. corporate or commercial aircraft, it is easier for insurers to spread whatever losses they do sustain over a higher number of insureds.
The other trend we have seen is less willingness by the markets to offer higher liability limits. This is a natural consequence of any hard insurance market, which is why we continue to suggest purchasing the highest limit of liability available so that you remain adequately protected. Insurers in a hard market will begin by refusing to offer higher liability limits to new insureds, so it is less likely that they will attempt to lower limits offered to their existing insureds.
So, for the remainder of this year we expect to see relatively small increases on renewals, keeping in mind that markets in this segment traditionally will respond to a series of accidents involving a given aircraft by quickly raising rates for that particular aircraft. Gallagher Aviation will remain in communication with these markets throughout the year and will keep our clients advised of any changes that could affect the cost of their insurance.
In the first two months of this year, Gallagher Aviation met with management of the largest insurers of light aircraft. Several common themes emerged from these meetings.
There is a definite effort by all the markets to increase rates. I say ?effort? because, unlike other segments of the aviation marketplace such as corporate and commercial aviation, there are more markets in the light aircraft segment, so it is somewhat more difficult to successfully raise rates due to the level of competition Therefore, several markets reported that they only received small single-digit rate increases in the first two months of the year, due to competitive pressures.
The downside of what would otherwise be positive news for owners of light aircraft is that many of the insurers are reporting only marginal profits in the light aircraft segment. This is in contrast to commercial and corporate aviation, where double-digit rate increases are resulting in sharply increased revenue for the underwriters. These markets have been able to hold double-digit increases for corporate and commercial accounts in part due to a number of eight figure jury verdicts or settlements in this space over the last 18 months. These large losses have affected all the markets, and thus stiffened their resolve to hold to higher rate increases to recoup their losses.
We do feel that continued marginal profits in light aircraft could result in markets reconsidering their commitment to this segment, perhaps not leaving the market, but instead becoming less aggressive and willing to offer reasonable terms. Fortunately, aviation insurers have traditionally favored the light aircraft segment because the relatively low aircraft values and liability limits vs. corporate or commercial aircraft limits their overall exposure to large losses. Also, given the large number of light aircraft vs. corporate or commercial aircraft, it is easier for insurers to spread whatever losses they do sustain over a higher number of insureds.
The other trend we have seen is less willingness by the markets to offer higher liability limits. This is a natural consequence of any hard insurance market, which is why we continue to suggest purchasing the highest limit of liability available so that you remain adequately protected. Insurers in a hard market will begin by refusing to offer higher liability limits to new insureds, so it is less likely that they will attempt to lower limits offered to their existing insureds.
So, for the remainder of this year we expect to see relatively small increases on renewals, keeping in mind that markets in this segment traditionally will respond to a series of accidents involving a given aircraft by quickly raising rates for that particular aircraft. Gallagher Aviation will remain in communication with these markets throughout the year and will keep our clients advised of any changes that could affect the cost of their insurance.
