The 2022/2023 aerospace reinsurance renewal season is an opportunity to reset retention levels, policy conditions and pricing levels to enable the global aerospace (GA) insurance market to continue to serve its customer base from end users, according to Gallagher analysts.
The reinsurance broker said the diversity of underwriters’ GA risk portfolios helps provide many direct insurers with a natural spread of risk that remains attractive to insurers.
Despite this, Gallagher cautions, the pressure to improve their margins inevitably forces many of them to review and recalibrate their GA pricing models, while also being affected by external global headwinds.
Inflation remains the top concern for insurers, according to a recent Swiss Re report. It is a challenge for insurers, analysts explain, because it “erodes nominal premium growth, impacts global demand and drives higher claims costs.” ”.
“In a sector that relies heavily 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 societal inflation and global supply chain issues and it’s easy to see why many GA insurers are pushing to increase premium rates.”
Regarding the conflict between Russia and Ukraine, Gallagher noted that the situation has not affected the general aviation sector in the same way that it has affected 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 start of legal proceedings just beginning to address complex leasing and policy coverage issues, all prudent insurers and reinsurers are reviewing their loss reserves,” the analysts added.
In addition, the analysts also noted that while there are many external factors to consider, GA insurers continue to place great importance on proven operational management expertise and security management systems and culture.
Gallagher said: “As the global aerospace industry emerged from the most dramatic industry shutdown in history, there were considerable concerns about fading skills and lack of currency. GA operators with strong SMS and management were better able to meet the immediate and continuing increase in demand for services in most GA sectors.
“Investments in safety and training by any GA operator continue to pay dividends when dealing with insurers, as the survival of the most operationally fit GA businesses will be a long-term structural benefit to the industry and the GA sector. support insurance.