04 April 2024
General Aviation Insurance
Market Update Q1 2024
In contrast to the frantic renewal activity during Q4, the first quarter of the year has historically been relatively quiet and a time to reflect and plan for Q2 and beyond. The activity in the General Aviation sector in Q1 would indicate that insurers’ appetites have shifted, with significant resource being dedicated to focus on General Aviation business.
Available capacity here to stay for 2024
As highlighted in the last edition of Plane Talking, the significant increase in available capacity in the sector, during 2023, has had the inevitable effect, of rate reductions in most areas of the business. This trend looks to continue and potentially accelerate, as insurers review their 2024 business plans in a challenging environment.
Many aerospace insurers are looking to diversify their portfolios, having reached a saturation point in the airline sector and General Aviation provides the perfect opportunity to do so.
We have also recently witnessed a number of high-profile hires by insurers in the sector, suggesting that the appetite for General Aviation business is a long-term play and that significant capacity will be available for the foreseeable future.
General Aviation claims and aviation safety
2024 has already seen several fatal accidents, across all geographies and as many predicted, this is in line with flight activity back to pre-pandemic levels.
It was somewhat ironic that, just prior to a Heli-Offshore meeting at HAI, which promotes the safety of the offshore rotor-wing industry, the news broke that a Bristow-operated S-92 helicopter ditched in the North Sea, tragically resulting in 1 fatality. It highlighted that no matter how hard safety organisations and operators work to mitigate flight risk, losses are inevitable and the response of insurers is key at this difficult time for operators and those affected by such a loss.
Claims inflation, by way of increasing aircraft values, rising repair costs and rising liability awards are key concerns for General Aviation insurers. In particular, social inflation and the increased frequency of high-value verdicts. What was once considered a nuclear award (>USD10 mn) some five years ago, has now seemingly become commonplace and in fact, we are now routinely seeing such awards in excess of USD100mn, specifically in US Courts. This was seen most recently, on 5th January 2024, when a Nevada judge awarded a USD100mn settlement to the parents of a British tourist killed in a Grand Canyon helicopter crash in 2018. Notably, Airbus Helicopters which manufactured the aircraft paid USD75mn of the award while the operator Papillon Airways paid USD24.6mn. Given the relatively small premiums associated with General Aviation business, aviation awards significantly influence underwriting sentiment and pricing, particularly towards those operators perceived to be a higher risk.
Supply chain pressures
Many of the discussions with clients at the Heli-Expo in Anaheim, centred on the availability of new aircraft and spare parts, required to service existing fleets. Many operators expressed concern that the lead-in times for essential spare parts could potentially mean grounding aircraft and creating a knock-on effect for those industries reliant on the movement of employees by air.
Insurers will be mindful that any significant delay in the supply chain, resulting in the grounding of aircraft, will have an impact on premium income.
The consensus among operators was that the supply chain will continue to be a major challenge during 2024 and we will be watching this situation closely, throughout the year.
Aviation Hull War
Following significant rate increases for most operators during 2023, it would appear that the Aviation Hull War market has found a level.
As reported in the Q4 edition of this publication, we are now seeing insurers deploying capacity on Hull War placements, to complement their Hull & Liability offering.
That being said, ongoing conflicts throughout the globe and rising tensions in Asia, are prompting insurers to be more selective in their underwriting. This has prompted brokers to explore new product development opportunities, to ensure that our clients have an insurance product which is fit for purpose and will respond when called upon.
Innovation in the general aviation sector
It seemed poignant that the opening meeting at the Helicopter Association International (HAI), was the launch of its rebranding to VAI, Vertical Association International, with the first ‘Verticon’ to be held in Dallas, next year. The rebrand was vital to incorporate, what many see, as the future of the industry.
The development of eVTOL and eSTOL aircraft types continues to gather pace, with operators actively looking at how they can incorporate this new technology into their operations.
This is an area which we will be watching very closely, as many predict that eVTOL aircraft could be carrying 4 passengers, around densely-populated cities, by 2025. The future is now.
General Aviation Outlook
Due to the continued availability of high-quality capacity in the General Aviation sector, in the absence of a significant industry, or world event, all indicators point to a further softening of rates throughout 2024.
Insurers are mindful that they will need to be creative to retain and attract business and many are prepared to offer multi-year deals to maintain revenue, in a softening market. 2024 will be an opportunity for some clients to take advantage of this offer, which will provide clients with insurance cost certainty, beyond the traditional 12-month term.
As brokers, we are engaging with our clients to discuss the availability of capacity for their specific risk, to obtain the most beneficial terms and widest possible coverage available.
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