Insurers Gaining Altitude…Barely. Continued from page 43 industry long-term average as settlements and courts have recently awarded much higher judgments for serious injury and fatality claims. Again, this increase in the number and cost of claims has had a direct impact on insurers’ ability to sustain profit. Since January 1, 2018, six aviation insurers in the world- wide market have ceased underwriting aviation risks. Insurer withdrawals, at this level, have not occurred since 2001, triggered within weeks after September 11th . If more insurers are considering discontinuing their aviation under- writing operations in the future, the market would be further pressured. While the withdrawing insurers were properly capitalized, their abandonment of the aviation insurance market was prompted by internal decisions due to unsus- tainable long-term premium levels. If the aviation insurance market was a robust environment, 15% of the insurers would not have withdrawn from the market in 2018 alone. We anticipate brokers will be working with insurers to secure the insurers’ best terms for their clients. But in general, all insurers continue to strive for increased pricing, likely low double-digit levels for policy placements with favorable loss histories. Accounts with challenging loss histories can likely expect not only higher pricing, but also possibly higher deductibles, lower coverage limits in some cases and tougher demands upon them from insurers for safety standards. Stricter training requirements may be a focus by insurers as well, to improve operations wherever possible in hope of reducing potential loss frequency and severity of claims. Owner-flown turbine aircraft, whether fixed-wing or rotorcraft, will likely be more challenging in 2019, requir- ing committed training for pilots and adherence to quality maintenance standards. Aviation General Liability policies (Premises, Products and Hangarkeepers Liability) in par- ticular are under tremendous rate pressure, with an industry loss ratio of approximately 130%. Commercial helicop- ters are even worse, with a loss ratio hovering over 150%. Obviously, no insurer wants to expose its capital to business that shows little chance of making a profit, therefore, with- drawals by other industry insurers may well continue. Any GA business should look for every opportunity to improve its operational safety, training focus, equipment maintenance, facility security and even OSHA awareness and compliance. Wherever possible, operators should strive to meet or exceed industry best practices, such as those embodied by the International Standard for Business 44 Aircraft Handlers (IS-BAH). GA businesses are well advised to maintain the highest safety standards and training pos- sible, not just because it is the right thing to do, but because it may also mean the difference between your company purchasing affordable comprehensive insurance or barely having coverage to meet your needs at very expensive costs. Safety costs a fraction of the full expense of a loss and your insurer only pays a portion of every loss! There are always uncovered costs associated with losses, such as the pain people endure when injured or worse, reputational damage, unhappy and lost customers or escalating future insurance costs. In summary, when reviewing the cost of insuring aircraft through the years, the average cost of coverage for a turbine aircraft today is roughly 30% of the price in 2006. Many insurers will have increased premiums an average of 7.5%- 10% for 2018, and possibly another 10-15% in 2019 which could result in the price of coverage for that same aircraft being about 40% of the 2006 price—which is, by any mea- sure, still a good value to the insured! Through 2019, we expect aviation insurers to continue their push for higher pricing in their quest for sustained underwriting profit. If pricing escalates to a level too high, then most insurers understand it will invite competition into the market and drive pricing back to unhealthy levels. Long- term stability is the goal of the aviation insurance market. In 2019, it will be interesting to see if insurers will wisely work with brokers and insureds to truly achieve this much-needed stability or return to the boom and bust historical trend seen in years past. AssuredPartners Aerospace is one of the nation’s largest aviation insurance brokerage firms. Specializing in risk management solutions specifically for the aviation industry, the company’s expertise includes business and general avi- ation, fixed base operations, aviation universi ties, airports, aircraft management companies, aircraft mainte nance facilities, aircraft owners and aerial application operations. In addition to serving many well-known businesses and individuals worldwide, AssuredPartners Aerospace is also program administrator for the National Air Transportation Association’s and the Independent Fixed Base Operator Association’s very successful Workers Compensation pro- gram. The company serves cus tomers through offices in Golden, Colorado; Dallas, Texas; Columbia, South Carolina; Frederick, Maryland; Wichita, Kansas; Phoenix, Arizona; and Hillsboro, Oregon. Aviation Business Journal | 4th Quarter 2018
