Aviation XoL pricing broadly flat at April 1 as stabilisation begins

By Michael Jones

April 1 - (The Insurer) - The aviation reinsurance market started to stabilise at April 1 renewals following multiple major losses in recent months, with renewals largely coming in flat, the industry's reinsurance brokers said in post-renewal reports.

• Aviation proportional T&Cs largely unchanged with stable capacity levels

• Increasing imbalance between direct and reinsurance aviation market

• Plentiful reinsurance capacity for hull war and AVN52 placements

Gallagher Re pointed toward high-profile loss events, including the Jeju Airlines and American Airlines incidents, which has resulted in growing calls for stabilisation in the direct and reinsurance markets.

The reinsurance broker said excess of loss pricing remained broadly unchanged for programs renewing or renewed early ahead of April 1. Howden Re said April 1 risk-adjusted pricing was largely flat, a slight hardening on the 3.5% reduction seen at January 1 renewals.

Some smaller, geographically diverse, single-territory placements saw a degree of pricing competition as certain reinsurers sought to grow books outside their main schedule ABC accounts, Gallagher Re said.

Treaty terms and conditions remained largely unchanged on the proportional side. Gallagher Re said that capacity levels have generally remained stable with attempted changes to commission levels subject to reinsurer scrutiny.

Like January 1 renewals, reinsurance capacity remains plentiful for aviation hull war and AV52 placements. Gallagher Re said pricing reductions for non-proportional covers were slightly more pronounced at April 1 renewals.

Howden Re also highlighted an increasing imbalance between the significant overcapacity in the direct market and the reinsurance market, which is bracing for the potential of impending losses and future hardening.

The direct market has been the subject of much scrutiny since the turn of the year, particularly from Lloyd's. The Corporation has said that direct aviation, aside from the aviation war, remains marginal for sustainable profitability and would struggle in the absence of appropriate price increases.

Gallagher Re said the backdrop of this scrutiny, alongside the significant major loss burden and Swiss Re's withdrawal, could lead some to anticipate dynamic changes within the market. However, it said there was little evidence that market is taking "meaningful corrective action".

Howden Re said Russian leasing losses have added some complexity to treaty renewals, although they were often classed as non-segment specific. Gallagher Re CEO Tom Wakefield said the reinsurance broker was watching this with interest to see if "expected settlements" are forthcoming in the coming months.