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How the Aviation Insurance Market May (or May Not) Change in 2021

The aviation insurance market in 2020 will be remembered for lack of underwriter flexibility and insurance company competition, the likes of which we have not seen in multiple decades. Premiums were up significantly, and underwriters returned to more traditional underwriting of pilots and overall risk.

The question now is – what will the aviation insurance market look like in 2021? Unfortunately, more of the same. While it is tempting to blame the market on greedy underwriting, 2020 was not a good year for the aviation underwriters. Even with the premium increases obtained, there were several market forces that left the underwriters with poor financial results:

  1. January 2020 – S-76 crashes into a hillside in Southern California, killing nine people, including Kobe Bryant.
  2. February and March 2020 – Tornadoes hit airports in Tennessee, Arkansas, and Louisiana.
  3. Fallout from the Boeing 737MAX losses continue to have an impact on our market. The overall losses associated with the Boeing 737MAX is looking to be $2 billion, which is significant considering the worldwide aviation insurance premium is estimated to be less than $2 billion.
  4. The Coronavirus Impact – March 2020 saw the onset of the pandemic and extreme slowdown in commercial aviation, especially the airlines, causing a significant shortfall in premiums.

The aviation insurance companies purchase reinsurance to protect themselves from large losses. As the large losses continue to hit the reinsurance market, the reinsurers will be passing along increased reinsurance premium to the aviation insurance companies – potentially a 50% to 100% increase when their reinsurance renewals come due. No doubt that a portion of these increases will be passed along to insureds.

As aviation insurance brokers, the most frustrating aspects of the market in 2020 were the overall lack of competition among the carriers and the return to more restrictive underwriting. The lack of options was made worse by the underwriters returning to more traditional underwriting. Flexible pilot warranties were replaced by annual make and model specific pilot training requirements. Pilot age was again a hot topic for underwriters. The use of deductibles to lessen underwriter exposure was also back in play so just when we needed options, we did not have any.

This leaves many wondering what can be done to alleviate the issues associated with the current market. There has never been a better time to sell yourself and your operation:

  • Talk about what you are doing to go above and beyond for recurrent training.
  • If you have losses, explain the steps you have taken to mitigate the exposures.
  • Provide any requested renewal information to your aviation insurance broker; that information helps your broker sell you to the underwriters.

At AssuredPartners Aerospace, we have the experience and knowledge to help you navigate a difficult market. To learn more about the best way to protect yourself on the ground and in the air, visit AssuredPartners Aerospace or contact our team of aviation professionals.

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