As we discuss the aviation insurance marketplace with our clients we focus on the consequences for them: higher rates, reduced coverages, fewer options, and stricter training requirements. But the big picture and understanding what is happening on the underwriting side is important for all stakeholders to work together.
Reinsurers endured the largest claim year in 2017 in the P&C lines of insurance. 2018 was a tough year as well. With that, the hard market started at the end of 2018. To top that off, aviation insurance claims this year have been very significant (see our Boeing 737-Max posts).
As a result reinsurers have tightened controls on their agreements with our insurance company partners. Lack of compliance with these requirements is not an option. Underwriters cannot cover the high-limit catastrophic potential of aviation claims without securing reinsurance for themselves. As insurance company controls and cost of reinsurance heighten, these companies have to assess their very existence.
Three aviation insurance companies in the United States have shut down their aviation divisions in the last year. That translates to 20+ aviation insurance underwriters seeking new jobs in an industry that is contracting. And contraction is inevitable in a hard market.
When underwriters reduce coverages or restrict training requirements, they are doing it for their job and their company’s survival. Our job is to work within these parameters and find creative ways to secure the best possible insurance contracts for our clients. Understanding and helping our insurance company partners to remain open and profitable cannot be divorced from daily negotiations.