For the past year we have been transitioning into the hard market for aviation insurance. The transition has been very tough both on aircraft operators (rate increases, less coverage options) and aviation insurance underwriters (several company closures with layoffs).
Purely based on experience during the last hard market in 2002, the hard market cycle is likely to remain for 3 to 4 more years. World events could affect this timeline.
So what can aviation insurance consumers do:
- First and foremost, align yourself with an insurance broker that has a good reputation. Now more than ever, insurance underwriters can only put their best offer on the table if they completely trust the underwriting information being presented. Aligning yourself with a broker that is known for honesty and transparency can make the difference between going out of business or carrying on.
- Realistic expectations. During the soft market that just ended underwriters exercised tremendous flexibility on premium and training. Training is now more important that it ever was for underwriters. This is because their companies are under threat of market exit. They have to keep claims activity down however they can. Training (the human factor) is the best place to control this. So expect to do training and include it in your budget. We are still achieving some training exceptions but they are few and far between, depending on many factors of each risk.
- Allow your broker as much time as possible to negotiate renewal terms. This means providing applications as soon as possible after the request comes in. It’s already a hard market to negotiate what you need out of your policy, there’s no need to add a time constraint.
Our expectation is that more insurance companies will be exiting the marketplace as new Reinsurance agreements make them unprofitable. How many more, perhaps as many as 3 more companies based on the number of insurers in the last hard market. This will continue the trend of rate increases, coverage reductions, and strict training requirements.