Following the Covid-19 pandemic, geopolitical shocks and macroeconomic challenges, rates for aviation reinsurance are continuing to increase, a report from Gallagher Re has revealed.
According to Gallagher Re, the insurance and reinsurance market will always be cyclical, and the aviation segment is no exception to this. In recent years the industry has seen turbulent cycles that have led to some carriers restricting the amount of aviation business they underwrite, or in some cases withdrawing altogether.
Today, the aviation insurance and reinsurance market is facing a unique set of challenges. Global inflation, and social inflation, coupled with the volatile geopolitical environment is affecting companies of all types around the world, but is perhaps particularly acute for the aviation insurance and reinsurance segment.
In recent months and years there has been a series of very large aviation losses which has had repercussions throughout the whole of the aviation insurance and reinsurance market. Against this backdrop, however, Gallagher Re said the aviation industry itself is beginning to show “green shoots” after the difficult years during the height of the COVID-19 pandemic.
The industry is predicted to return to almost pre-pandemic levels this year as the demand for air travel continues to pick up after the lifting of travel restrictions.
There remains a number of challenges, however. These include inflation, rising fuel costs, labour shortages, supply chain pressures and the drive toward net zero.
According to Gallagher Re, reinsurance rates are likely to continue to increase or remain at today’s levels for some time to come. The company said buyers of aviation reinsurance should consider the reinsurer position when it comes to adjustable rates even if direct market premium is not growing at the same pace as the rates-on-line. Nor should a tougher stance on minimum premiums come as a surprise.
“Over history the reinsurance market has not always been the most disciplined and time will tell whether the current market cycle will result in a return to healthy growth. But we believe that learning from the lessons of the past and thinking about the changing risk outlook of the future will mean that the aviation (re)insurance market remains in good health for the medium term,” Gallagher Re said.
Last year, Gallagher picked InsurTech company Novidea to implement and tailor its insurance broking platform for its specialty client base.
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