Trenwick warns figures may prompt insurer exodus from aviation
Insurers are ready to pull back from the aviation market if prices keep falling.
Having been hailed as a booming market last year, aviation prices fell during recent renewals.
Marsh reported core premiums down by 10% to 15%, while fellow broker Aon reported average premiums fell by 21% in December 2002.
Industry analysts predict that worldwide premium income for aviation insurance will fall to between $3bn (£1.9bn) and $3.5bn (£2.2bn) this year, down from an estimated $4.5bn (£2.8bn) to $5bn (£3.1bn) last year.
Michael Watson, chief executive of Trenwick's London operations, said the figures were perilously close to the point where his company would start pulling out.
"It starts to become a marginal proposition once you get below $3bn," he said.
"If we don't think the gross rate is sufficient we will have to pull our horns in."
Trenwick's projections show it will write lower aviation premiums in 2003. But cover for aviation products is expected to do well, while airline and war cover prices are expected to decline.
Trenwick's Syndicate 839 is one of the major aviation businesses, but Watson argues the company could redeploy the capital into other classes of risk.
He also called on the giants in the class - Berkshire Hathaway and AIG - to use their clout to keep prices high.
Berkshire Hathaway, via its affiliate National Indemnity Company, supplied £113m of Trenwick's capacity for 2003, including £100m for aviation underwriting, or just about all its capital requirements for aviation business.
Berkshire Hathaway has other large aviation investments and, along with AIG, is believed to have nearly half the world's capacity for aviation cover.