QUARTER ONE 2009
The aerospace insurance market moved closer to parity as 2008 drew to a close, with activity in the first quarter of 2009 suggesting that the year will continue in the same direction or even harden.
contents overview sector analysis
Airports Service Providers Manufacturers
After lead premium softened on average by 4% in 2007 and 1% in 2008, the first renewals of 2009 suggest that there will be fewer premium reductions available in the aerospace insurance market as the year progresses. Just over half of the renewals recorded so far have seen their lead premium decrease, compared to around 70% in 2007, suggesting that the market is close to levelling out. Global Factors The move is being driven by two interlinked factors, the global economic challenges faced by all industries and the situation in the aviation insurance markets as a whole. The downturn in economies worldwide is forcing underwriting capacity providers to examine their activities with a view to concentrating on participation in sectors that offer good returns. At the same time, the soft market conditions in the aviation, or specifically airline, insurance markets in 2006 and 2007 have meant that there have been limited or even no profits for underwriters over the last two years in the sector, despite the harder markets in 2008, particularly when fixed or reinsurance costs are taken into account. This means that aerospace underwriters are likely to be under significant pressure as a result of the airline sector suffering two years without profit.
Expiring Premium (US$m) 92.61 167.17 344.88 244.83 849.50 47.03 47.03
Sweeping Generalisation Stating that the aviation sector made a loss is something of an over-simplification given the different pricing strategies that underwriters employ. Aviation insurance as a whole is comprised of a number of different markets and while airline is the most high profile, the aerospace market, as well as a number of subsidiary markets, have delivered consistent returns over the last few years, and as a result may not suffer as notable a capacity contraction. The aerospace insurance market did not go through the very soft market conditions witnessed in the airline market in 2006 and 2007 when average reductions reached as high as 20%, because it did not harden as strongly following 9/11. As a result it may not harden to the same degree in 2009. Furthermore, the impact on the different sectors within the aerospace industry will vary according to risk profiles, sector, loss records and individual nuances. The underlying trend for market direction is likely to be similar however. As a result, the reality is that the level of focus on the aviation sector overall makes it less likely that there will be premium reductions on aerospace placements during the coming year.
Aon Political Risk Map 2009 quarter one aerospace renewals
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Renewal Premium (US$m) 87.36 168.51 336.40 239.62 831.87 43.03 43.03
US$ Premium Movement (% Change) -6 +1 -2 -2 -2 -9 -9
RC* Premium Movement (% Change) -5 -3 -2 +6 -1 -2 -2
Quarter 1 2008 Quarter 2 2008 Quarter 3 2008 Quarter 4 2008 2008 Total Quarter 1 2009 2009 to date
59 57 71 59 246 27 27
Source: Aon Market Data *RC: Reporting Currency Numbers on a like-for-like basis
AON AVIATION & AEROSPACE | AEROSPACE INSURANCE MARKET NEWS
Quarter One 2009 | Page 1
Renewals Expiring Premium (US$m) 32.74 7.16 7.13 47.03 Renewal Premium (US$m) 29.63 7.29 6.11 43.03 US$ Premium Movement (% Change) -10 +2 -14 -9 RC* Premium Movement (% Change) -2 +6 -9 -2
Airport Manufacturer Service Provider 2009 to date
9 9 9 27
Airport (including ATC)
The airport sector has continued the trend it settled into at the end of 2008, with average lead premium reductions of around