The first half of 2013 has seen no change in the downward direction of insurance premiums in the airline market and the balance of power remains firmly in the hands of buyers, according to the Q2 Issue of Airline Insight, from Willis Group Holdings, the global risk adviser, insurance and reinsurance broker.
The loss of an Asiana B777 aircraft - which sadly resulted in two fatalities - will do little to alter the downward trend in premium prices in the airline insurance market, according to the report.
Premium levels have reduced by 5% in the first half of the year, which equates to US$13 million being eroded from the overall market premium. Meanwhile, the growth in exposures continues to consistently be in the mid-single digits and as a result rating levels continue to decline with average hull rates down 11% and average liability rates per passenger down 13%. This has resulted in the overall cost per passenger for insurance falling by 12%.
Losses for the first six months of the calendar year (excluding Asiana) are currently estimated to be US$488 million, including anticipated attritional losses, according to Willis.
"The low loss levels combined with abundant capacity and growth in exposures continues to provide perfect conditions for buyers and challenges for underwriters, with little sign of a change in any of the market drivers and as a result the downward slide in premiums looks set to continue unabated," commented Phil Smaje, CEO of Willis Aerospace.
He continued: "In recent years the airline insurance market has seen a number of new entrants bringing additional capacity. This, combined with a series of consecutive years of low frequency and low severity losses, has served to further increase competition and drive premium prices down. At this point, it is difficult to see how a single catastrophic event could reverse this prolonged period of rate softening."