You may recall my article regarding hard markets from a few months ago. If not, here’s a quick refresher: I mentioned that many of the luxuries policyowners have enjoyed for years (almost a decade) are starting to dry up. Training considerations, higher liability limits, and the ever-important annual rate reductions are starting to become things of the past. Well, it didn’t take long to go from “the hard market is coming” to “the hard market is here.”
In just a few short months, we’ve gone from one end of the spectrum to the other. What was once a process of sourcing competitive quotes from several carriers has now turned into a matter of hoping the incumbent carrier doesn’t pass off an unjust rate increase. Notice I slipped “unjust” in there. That’s because there will (likely) still be a rate increase at renewal, but it’s a question of whether or not it will be a fair increase. We’re starting to see universal increases ranging from 5% to 30% or more, with factors like loss history, industry, and aircraft type as factors dictating where policyholders fall in that range.
I’m sure most of you are thinking, “What happened to make the market take such a sharp turn so quickly?” In short, it’s because of massive losses — in both severity and frequency — in a short stretch of time. Losses like the East River helicopter crash in March, the Grand Canyon helicopter tour incident before that, and more recently, the Leicester City corporate helicopter accident and Lion Air’s Boeing 737 tragedy. These are just a few that made the news. Anyone keeping tabs on the aviation industry knows there are dozens more, even as recent as the publication of this newsletter. The whole point in educating our readership on the state of the aviation insurance market is so that each policyholder understands where the market is going and hopefully has a more reasonable expectation when their own renewal comes up.
The vast majority of aviation operators are safe and accident free, which makes it a harder conversation when explaining their rate increases. However, at this point, we have an industry issue, not an individual policyholder issue. It’s like a town or community coming together to support a common cause.
Although only a handful of bad losses have upset the market, it’s going to take contributions from everyone, including the operators with spotless records, to chip in and heal the wounds of the market. With enough time and a good stretch of safe flying, we’ll get back to the glory days of a soft market!