03 October 2024
General Aviation Insurance Market Update Q3 2024
As we enter the final straight of 2024, market softening continues to dominate the headlines. Whilst most of the world’s airlines renew in Q4, a number of significant and high-profile risks renewed in Q3 and the general theme, was one of significant reductions in rating. Q4 is sure to follow this trend, but what factors might halt the continued slide in 2025?
Broker competition & insurer appetite driving rate reductions
As we have discussed throughout 2024, capacity in the General Aviation sector has increased and continues to do so, despite the softening market conditions and the reintroduction of meaningful rating differentials.
Brokers and Insurers have invested significant sums within the sector, to diversify their respective portfolios, inevitably increasing competition and driving down rates.
With the increased number of underwriting units and the relative scarcity of recognised leaders in the class, the ability to service business will increasingly come under scrutiny and will be a decisive factor in the market selection process.
Soft-market conditions have a much wider impact on the insurance market, than rate alone. To differentiate, brokers and Insurers have to look to improve and expand coverage beyond that which would ordinarily be included, within a standard General Aviation insurance policy. It remains to be seen whether the expansion of coverage, under such policies, will affect losses in the sector, in the coming years.
Whilst the current market climate is good news for aircraft operators, who have faced significant challenges over recent years, a stable, predictable and sustainable insurance market is what many clients would like to see.
Challenges to navigate
A common theme of conversation with insurers is the demand for growth from senior management. Whilst all insurance companies would insert the caveat that making a profit remains paramount, it is difficult to see how profitability can be achieved, or maintained, in line with growth, against a backdrop of overcapacity and rate reductions.
In the current cycle, there is significant pressure on those markets that simply provide the following capacity and do not have the capability to offer other aviation-related coverage.
The requirement for growth has also prompted General Aviation insurers to deploy their capacity on much larger turboprop and jet operations, with higher values and significantly greater passenger liability exposure. Many of these regional operators would have historically been insured within the airline market, with a significant spread. We are now seeing such operations being covered within the General Aviation sector, often with few insurers, with significant participation.
Brokers are also facing similar challenges. Inevitably, softening rates directly affect our ability to grow organically, in our traditional space.
Whilst pricing will always be a key factor in the client’s decision-making process, the value of the broker is often not realised until the unthinkable occurs. Market selection and professional claims advocacy are even more important during a time of significant over-capacity. The ability to negotiate complicated claims, on behalf of our clients, often outweighs any promise of short-term premium savings.
Acquisitions key to growth
As the pursuit of growth continues, against the soft-cycle backdrop, 2025 will likely see insurers look to acquisitions to meet those growth expectations.
Specialist MGAs (Managing General Agents) continue to be attractive targets for insurers, but in the General Aviation sector, they are finite.
There is a feeling that significant acquisitions could be made, with the potential for consolidation, which may influence available capacity going forward.
Notwithstanding the current market climate, Brokers continue to invest heavily in the General Aviation sector, by hiring teams and individuals, targeting specific classes of business and geographical regions.
Will anticipates losses affect GA capacity in 2025?
It would seem, that after what seems like an eternity, 2025 may be the year which provides some clarity surrounding the losses suffered by lessors, following Russia’s invasion of Ukraine.
Whilst the outcomes of the numerous claims are unknown and may never be fully disclosed, it is widely believed that there will be a significant loss to the aviation insurance market.
Although General Aviation insurers were not directly exposed to these losses, many of these companies have teams underwriting other segments of business which may be. It will be interesting to see how insurers, and their reinsurers, react.
Losses in the General Aviation sector have returned to the predictable pre-pandemic levels, and as previously reported in this publication, the severity of weather-related losses has significantly increased over that time.
A combination of these factors and the continuing geo-political uncertainty in many parts of the world will pose new challenges for insurers and brokers alike, into 2025 and beyond.
General aviation outlook
We expect that market conditions will continue to soften until the end of the year, but, as ever, there are numerous factors which could affect rating and available capacity in 2025 and beyond.
On a positive note, in discussions with clients, they have noticed that certain areas of the supply chain to the aerospace industry, seem to be improving and are hopeful that things will further improve into 2025.
The General Aviation industry continues to evolve and adapt in a constantly changing world. Many aircraft operators have repurposed aircraft to deal with the issues we face today.
We will share the stories of some of these operators in the Q4 edition of Plane Talking.
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