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Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.
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Hello, I'm Ed Louth, I'm the Head of the Broking team for Aviation and I'm here to deliver a quarterly update on market conditions and what to expect in the final quarter of this year.
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And I'm going to split this into two parts.
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We're going to talk about the all risk market and we're then going to go and talk about war capacity.
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From an all risk perspective, everything's looking good.
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It's been a great year for safety touching wood.
0:45
Accidents are at, you know, record levels and the industry has had a great performance from a safety perspective.
0:52
That means most underwriters are looking at a profitable year and that has drawn capacity into the market, which means you as a buyer have a lot of choice.
1:03
There is plenty of appetite in the market for new business and generally speaking we're seeing clients come to the market with small exposure growth and they're being able to generate rate reductions.
1:16
From a positive perspective, we think that this is going to continue through to the end of the year.
1:22
The big cloud on the horizon from an all risk perspective and also from the war perspective is what's going on in Russia.
1:29
But recently there has been some positive news in the press around air cap and the Russian government reaching a settlement for some of the aircraft which have been detained.
1:39
This is only adding to a sense of optimism and a sense of positivity from underwriters.
1:45
And I think through to the end of the year is going to be a good time to buy aviation insurance.
1:50
As always, come to the market prepared, present the information in the right way and rely upon your broker and the relationships to drive the deal.
1:59
But this should be good news for most clients, we think in the final quarter. War insurance has been much more challenging all year and even into last year we've seen significant increases and for most clients we're now talking about year over year increases which are compounding.
2:18
War capacity is reduced.
2:19
We have fewer options available and the options that we do have of tended to be expensive.
2:26
We've also seen coverage restrictions over the last 18 months.
2:31
Fortunately, they seem to have subsided.
2:33
I think the market have taken the corrective action that they feel they needed on the war policies and it's really just a pricing game now.
2:42
Earlier in the year, we were really advising clients that the market were looking for rate change in the region of 75 to 100%.
2:50
I think our feeling is that a little bit of steam has come out of that.
2:54
There have been some deals that have gone through a 60% rate change in the last few months and I think certainly going through to the end of the year, we suspect that the rating increases will soften slightly from there as well.
3:09
It is dependent, there are some risks which are going to be more challenging than others.
3:14
Anybody who needs to buy large capacity is going to find it more expensive because really there is a lack of capacity for people buying the top limits and certain parts of the world have become quite problematic this year.
3:28
One of the big changes that we've seen is that a lot of war insurers are now running an aggregated level of exposure to certain regions or certain countries.
3:38
So some clients have found it quite difficult to buy that capacity because underwriters have filled up their allowance or their limit with other renewals which have happened earlier in the year.
3:50
So I think talking to your broker is going to be the best advice.
3:53
Really we need to be looking at your situation, who you are, where you fly and what the geopolitical tensions are around where you based.
4:02
All of these are going to be taken into account and there will be some differentiation from the market, but I think there's also positives there as well.
4:10
I think for the bigger clients in the more stable environments, I think they will be able to cut a better deal than they did earlier in the year and the increases will be less than they paid last year, albeit war insurance is becoming much more expensive.
4:27
Again, I think the news coming out of Russia in terms of some of those settlements can only be a positive.
4:32
The market has begun to price as though they were paying that claim and it now appears as though there may be some chance, even if it's a partial chance of a settlement being made without a contribution from insurers.
4:47
So again, come to the market early, rely upon your relationships, have a clear story and a clear message for the market and talk to your broker, seek advice and we're confident that we'll be able to get some good deals across the line in the final quarter and who knows what next year will bring.
