When tragic airline losses filled our screens this past year, the airline insurance marketplace was braced for some heavy turbulence and an end to what’s been a long soft market. Many of us have been surprised by what’s transpired. Rates have gone up, in some cases steeply, but perhaps not as uniformly or dramatically as expected.
Why? The underlying dynamics that have kept the skies calm for airlines insurance rates – developing technology and standards that have produced a remarkable safety record – remain in place. Capacity seeking profit in the insurance sector also remains in place. So the competitive forces that have kept rates down are to a great extent in place as well.
That doesn’t mean the carriers haven’t been affected. They have – but they fall into two categories. First are those carriers directly hit by the losses, who are now under immediate pressure to raise rates and balance the books to the extent possible. Second are those carriers not hit by the losses, but who face a longer-term pressure to stop the decline in rates.
Carriers on both sides of this divide seek rate increases. Those in the first category are actively seeking them. Those in the second are anticipating them. The question for observers of this market segment is this: will these divided interests and motivations create a competitive field that buyers will still be able to work to their advantage, thereby mitigating the expected turn in the marketplace?
We shall see which way the contrails blow.
If you’d like to hear more, and watch some jet aircraft zipping by, see my WillisTV video.