Market Update from the Carriers
It’s been a while since we’ve talked about the current market climate. Mostly for two good reasons:
1) Every operator has gone through at least one, if not two renewal cycles in this market, so they are well aware.
2) It’s just not a pleasant topic to discuss.
However, as we’ve always done, we’ll give it to you straight and keep you informed. Here’s an excerpt from Kyle Sparks, chief underwriting officer at Starr Aviation, on his views of the market:
“Reviewing the capacity in the general aviation market over the last 15 years, the number of underwriting facilities more than doubled worldwide from 2006 to 2017. This created a very long cycle of unsustainable soft market conditions, producing lower premiums and introducing a great number of coverage enhancements. With a reduction of capacity in GA beginning in 2017, the market began the correction cycle in 2018 which continues today. It is our belief that 3 years of correction is not enough to resolve the dramatic soft cycle swing. We continue to project an average rate increase of 20% across the GA sector throughout 2021, with increased emphasis on underperforming segments of the business. Pricing correction in some segments has only gotten us back to 2015 pricing levels, when we were experiencing an over capacity situation. The expansion of coverages will also be tightened or re-underwritten to cover the additional attritional claims generated over the last 10 years. Each segment in GA must be able to support the attritional losses of the segment and allow for catastrophic loss load factors to cover losses within the overall aviation insurance industry. Many of the general aviation losses create headlines and are known to the industry within minutes or days. Unfortunately the cost of those losses has substantially increased, and the attritional GA losses are much more frequent, eroding the base premium and deteriorating results to unhealthy levels. Typical attritional loss values have escalated tremendously over this period due to the value of the aircraft, parts, and labor. Failure of the market to achieve adequate rating levels will create unstable buying positions and capacity movement.”
Although very technical, it’s very insightful and informative. It helps show where things were prior to the hard market, how we got here, and why we’re seeing what we’re seeing. As always, if there are any questions, we’re happy to discuss them further!