Airline insurance prices rose 25% on average in the fourth quarter of 2019, according to estimates by broking group Arthur J. Gallagher & Co.
In the fourth-quarter edition of its Plane Talking aviation insurance report, the broker said average prices for airline hull and liability cover increased by 20% for the full 2019 year but were higher in the last quarter. Underwriters continue pushing for double-digit price increases, but the increase paid varies by airline and risk profile, Gallagher added.
Airlines with liability limits of $750 million or less and low loss ratios are most likely to get the smallest increases, while those buying higher limits and operating wide-body aircraft, or those with five-year loss ratios above 50% regardless of size and profile, are being targeted for "noticeably higher" increases, according to Gallagher. In some "rare" cases, the broker added, there had been triple-digit percentage price increases.
War rates 'pressure'
Price rises were seen across all types of airline coverage, Gallagher said, with "notable pricing pressure" in aviation war cover in the latter part of 2019, after war underwriters paid the full value of Malaysia Airlines flight MH370 hull claim following arbitration. Gallagher said the claim was more than $100 million.
Flight MH370 went missing in March 2014 and has never been found.
Gallagher added that the war sector is likely to face "further pressure" given recent events in the Middle East, including the downing of Ukraine International Airlines flight PS752 on Jan. 8, and "heightened threat levels."
The Iranian government admitted Jan. 11 that it had unintentionally shot the plane down. It followed increasing tensions between the U.S. and Iran after the U.S. killed Iranian General Qassem Soleimani on Jan. 3 and Iran responded with a missile strike on U.S. air bases in Iraq on Jan. 8.
War and all-risk insurers are monitoring the situation daily, Gallagher said, and are likely to ask for more detailed underwriting information when considering coverage and rates, particularly for any carrier flying into or over the Gulf region.
Rate rises are not confined to airline coverage. Elsewhere in the report, Gallagher aerospace CEO Peter Elson said 2019 was one of the most expensive loss years on record for the aerospace insurance market, which was experiencing "what many consider to be the strongest upwards rate movement and toughest market environment seen in decades."