Gallagher: Airline all-risk market volatile 'for foreseeable future'

By Michael Jones

July 7 - (The Insurer) - The airline all-risk market will be volatile for the foreseeable future with insurers' ambitious premium targets contrasting against the "perceived need" for the market to face up to underlying stresses, Gallagher said on Monday.

In its second quarter edition of Plane Talking, Gallagher's aerospace global executive Nigel Weyman said that at the midpoint of the year, airline all-risk renewals have been "essentially flat", a trend he expects will continue into the third quarter.

The continuation of this trend comes with the availability of capacity remaining the main driver of pricing in the market. While there were concerns the withdrawal of Swiss Re would prompt others to reassess their positions, Weyman said the market has actually seen new entrants in recent months including Whitecap Re and XS Global.

This high level of capacity has continued to moderate the impact of losses/events on the rating trend. Weyman said the response from the Air India crash in June, which Gallagher estimated in the low hundreds of millions, and the UK High Court judgment on lessor claims has been muted.

Weyman said while the market response to the lessor judgment remains stable, there remains unresolved questions around potential appeals, interest payments and legal costs. He added that there are also around 90 claims under (re)insurance policies set to be heard in 2026.

There remains market speculation around the potential reaction of reinsurers to these judgments and possible upward pressure on reinsurance pricing flowing back into the direct market, albeit Weyman clarified this would only be truly understood at major reinsurance renewals towards the end of the year.

"We are yet to see a collective market push to increase rates, but legacy and loss-affected underwriters continue to communicate to brokers the pressures they are under from their senior management to exercise greater underwriting discipline and address portfolio profitability," Weyman added.

WAR MARKET

Recent hull war renewals have included lead rate reductions and an additional improvement in the composite result, Weyman said.

The market has responded to the lessor judgment as if this outcome was already priced in. However, the Gallagher aerospace executive said the large exposures of several war insurers cannot be ignored, with the recent judgment raising the prospect that some may reconsider their future positions.

Excess war third-party conditions are positive for buyers. Some existing markets are actively looking to increase capacity and the overall premium trend has seen flat to small reductions, Gallagher said.