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AIRLINE INSURANCEMARKET UPDATE
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Page 0 RAAKS Conference 2015
AIRLINE INSURANCE
MARKET UPDATE
Alex Chapman
March 2015
Page 1 RAAKS Conference 2015
Airline Market Drivers - Capacity
Total Capacity 217.35%
Non-US CSL US$2bn & MHV US$250m
Capacity
67.40%
Europe
81.75%
Lloyd’s
London
37.50%
30.70%
Intn’l
• Abundant Capacity
− New Entrants adding competition
• Diversity of Insurer Portfolios
− Aerospace remains attractive
• Predictable Catastrophe Sector
− Improving record safety record
Aerospace remains a high profile
sector that is attractive for insurers
Page 2 RAAKS Conference 2015
Airline Market Drivers – Claims
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
US
$ (
Millio
ns)
January - DecJanuary - Dec January - Dec January - Dec January - Dec
2010 2011 2012 2013
5 Year Average US$1.44bn
2014
Hull: $407.97
Liability: $790.79
Attritional: $465.00
Total to date: $1,663.76
Page 3 RAAKS Conference 2015
2014 World Airline Safety Trends
Source: IATA, ‘2014 Safety as at 30th September only (full report due April 2015)
Number of Western built Jet accidents per million sectors
0,00 0,25 0,50 0,75 1,00
M. East & N. Africa
Latin America
Asia Pacifc
Europe
North America
CIS
North Asia
Africa
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
2009 2010 2011 2012 2013 2014
Industry
IATA Members
“2014 will see an improvement in the worlds commercial aviation safety
performance”
Capt Kevin Hiatt, Safety & Flight Ops IATA
− This is impressive considering exposure growth
Page 4 RAAKS Conference 2015
Global Airline Consolidation
• Fewer Larger Programmes
• Economies of Scale
• Younger Fleets
• Improved Risk Profile
Page 5 RAAKS Conference 2015
Airline Hull & Liability
2014 Net % Premium Movements
Yearly Average +1.5%
January is an anomaly
due to the small number
of renewals
18.2%
-20.9%
-11.8%
-5.1%
-17.3%
-8.2%-10.2%
-2.8%
21.9%
19.7%
5.6%7.1%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
Yearly Average +3%
Page 6 RAAKS Conference 2015
A Divided Market
Total Capacity 217.35%
Non-US CSL US$2bn & MHV US$250m
Capacity
67.40%
Europe
81.75%
Lloyd’s
London
37.50%
30.70%
Intn’lMAS Participation
Exposed
Not
Exposed
Market Capacity
Exposure to MH370/017
Page 7 RAAKS Conference 2015
‘The Miss Factor’
Airline A Airline B Airline C Airline D Airline E Airline F
Market A
Market B
Market C
Market D
Market E
Market F
Market G
Market H
Market I
Market J
Market K
Market L
Market M
Market N
Market O
Market P
Market Q
Market R
Market S
Market T
Market U
Market V
Market W
Market X
Market Y
Market Z
Page 8 RAAKS Conference 2015
1,00
1,25
1,50
1,75
2,00
2,25
2,50
2,75
3,00
3,25
3,50
3,75
$700
$750
$800
$850
$900
$950
$1 000
2009 2010 2011 2012 2013 2014
PA
X &
Pre
miu
m U
S$
bill
ion
Миллиарды
AF
V U
S$
bill
ion
Миллиарды AFV
PAX
Premium
Airline Insurance: Risk Values & Premium
• Cost of claims
– Increasing?
Source: Willis Data
Page 9 RAAKS Conference 2015
Attack on Tripoli
Page 10 RAAKS Conference 2015
Hull War Market - Impact of Major Events
• Traditionally reactive market
• Est. 2013 annual premium - $60m
• 2014 Market Premium - $95m
• Average Rate Change - 16%
• Estimated annual losses
– >US$563m
Malaysia Airlines US$151m
Tripoli >US$400m
Iraqi, PIA US$12m
• Greater scrutiny of risk in general due
to rise in terrorist threat.
0%
100%
200%
300%
400%
500%
600%
700%
$0
$100
$200
$300
$400
$500
$600
2012 2013 2014
Lo
ss R
atio
%
Pre
miu
m / C
laim
s U
S$
(M
illio
ns)
Premium
Claims
Loss Ratio
Hull War Risks
Page 11 RAAKS Conference 2015
Will Aviation be Driven by External Factors?
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