'Bloody' renewals competition ahead as premiums fall
Aviation insurers are braced for brutal competition in the upcoming renewal season as premiums continue to drop.
One chief executive forecast a "bloody" end of year renewal season as underwriters are forced to compete for business - in contrast to the huge rate rises that followed 11 September. The biggest June renewal was that of Mexican group CINTRA, which controls that country's top two airlines; it negotiated a 41% cut in its premiums.
The second largest June renewal, Taiwan's Eva Airways, managed a 30% cut by leaving Allianz for Wellington. Brokers' estimated premiums were down 35% in June as against the same month last year. Aon estimated hull rates had fallen by an average of 43% in June. Aon reported, compared to the first quarter, hull rates were down 21% in the second quarter and premiums were down 24% over the same period.
Liability premiums were also lower, but brokers put this down to some airlines having chosen to detail liability charges separately last year. This meant, when several airlines renewed in 2003, liability surcharges were included in the overall premium for the first time, showing a higher level of premium reduction than for airlines that included 2002liability surcharges.
The tough renewal ahead raises the prospect of capital providers cutting involvement. Berkshire Hathaway, which, along with AIG, is thought to have provided nearly half the world's aviation capacity, has pulled out of Trenwick, whose aviation syndicate stopped underwriting last month.