Aviation reinsurers achieve major price corrections at 1/1: Willis Re

Reinsurers broadly achieved major price corrections and payback at the global aviation renewals in January, according to broker Willis Re, despite an abundance of available capacity.

Analysts reported that aviation rates were up by 15% on average for clean renewals, and by up to 70% for loss affected renewals. Underlying premium income percentage costings are also remaining at manageable levels, with economics improving in some cases.

Excess of loss structures remained stable at the 1/1 renewals, with a focus of rate increases as Ethiopian Airlines and PT Lion Air loss events are moving long-term average loss ratios of 50% to between 300% and 400%. Both airlines were connected to major aviation loss events over the last two years due to fatal plane crashes involving Boeing’s 737 Max aircraft.

Compounding this dynamic was the fact that reinsurers exhibited an unwillingness to quote against incumbent leads, Willis Re noted. Additionally, for quota share business, major risk treaties have generally underperformed over a 5-year period.

That said, reinsurers are not walking away, and cedants have looked to maintain cession levels and commissions under pressure. For retrocession business, Willis Re similarly reported that capacity remains plentiful, with rates up 15% for clean renewals, and up to 75% for loss affected renewals. Analysts noted that pricing for industry loss warranty and deemed line protections was less reactive due to more stable pricing during soft market conditions.

Source: Reinsurance News

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