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PLANE TALKINGAVIATION NEWSLETTER Q2 2015

LEAD LINESIs History Relevant?

With recent losses nearingthe USD1bn mark, versus anannual premium pot of...

ALSO IN THIS ISSUE

Market News 10/13

Rating Changes 10

Arrivals & Departures 11

Paris Air Show 13

Executive SummaryENTERING UNCHARTED TERRITORY

We find ourselves mid-way through another interesting year in the aviation insurance market. After experiencing a turbulent periodin the first quarter with mixed market conditions and some high profile losses, the second quarter was in comparison somewhatmore subdued, however that’s not to say that it was quiet, as this wasn’t the case.

On the renewal front at present it would appear that market conditions still remain favourable to buyers. Evidence so far in 2015would seem to suggest that conditions are slowly moving towards a return to a similar environment as seen prior to last year’s majorlosses.

The market has however continued to experience losses in both the Hull and Liability and Hull War sectors placing further pressureon it. Whilst we are told safety rates are improving, risk exposure increases year on year, as do attritional losses, costs and liabilityawards, yet premium volumes continue to reduce leaving little left to cover catastrophe claims.

Many underwriters feel this position is not sustainable, and a handful have recently withdrawn from aviation or a particular sector of itand are focussing on other lines of business that they deem more profitable. Whilst these markets are relatively small and have littleinfluence on general levels of capacity, the overall situation must continue to be monitored and still has the potential to be a catalystfor change.

As our Lead lines contributor comments “how can anyone begin to make any sense of the rationale behind today’s market?” It hasbeen evident for some time that the traditional market “model is broken” and therefore we remain in uncharted territory.

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RENEWAL ANALYSISThe majority of Q2 renewalsshowed some sort of growthin either average fleet valuesand or passenger...

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LOSS ANALYSISAfter an unfortunate firstquarter in the aviation industryin terms of high profile losses,we continued to...

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PROFILE

BRUCE CARMAN AVIATION UNDERWRITER - CATHEDRAL SYNDICATE 3010

Bruce is an aviation underwriter withCathedral Syndicate 3010, (Part of theLancashire Group) and specialises inAviation Hull War. Prior to joining Cathedralin October 2014, he was with AtriumUnderwriting for 27 years.

Bruce is a member of the InternationalUnion of Aerospace Insurers (IUAI) AirlineStudy Group, International Director of theAviation Insurance Association (AIA) andDeputy Chairman of the recently formedLloyd’s Market Association (LMA) AviationHull War Forum, he is a Chartered Insurerand an Associate of the CharteredInsurance Institute.

2 AEROSPACE | PLANE TALKING | Q2 2015

Continued on page 3 ��

Is History Relevant? With recent losses nearing the USD1bn mark, versus an annualpremium pot of USD90m, how can anyone begin to make any senseof the rationale behind today’s market?

The past 18 months has been the mostcostly period for Aviation Hull Warunderwriters in the history of the class.So why aren’t rates increasing?

The expressions “the model is broken”and “rates have to go up” have bothbeen used in recent months. Neither isan inaccurate observation for a class indistress that, for some reason, hasdisappointed to conform to the expectedpost loss, knee-jerk reaction ofunderwriters increasing rates. The“payback” that has traditionally made theclass so attractive is not there.

Aviation Hull War is a relatively youngclass and owes its origins to the Hull Warand Allied Perils exclusion imposed bythe Aviation market after a series oflosses in the late 1960’s. With theexclusion came the creation of aseparate class in 1970 with Marineunderwriters at Lloyd’s underwritingAviation War exposures alongside theirestablished Marine War book. In a similarfashion, the Excess AVN52 (Third PartyWar Liabilities) class was created in theimmediate aftermath of 9/11, where yetagain, the Aviation market excluded Warexposures due to the systemic riskassociated.

In the 45 years since its creation, theclass has experienced a few high profilelosses involving multiple aircraft that haveeffectively defined the class. The firstcatastrophic event occurred whenSaddam Hussein invaded Kuwait airporton 2 August 1990, resulting in a marketloss of USD600m. Lloyd’s syndicates’size at that time effectively meant thatthose involved took a significant hit totheir bottom line. The market reacted byincreasing rates for Middle Easternoperators and levied additional premiumson others flying in. Key factors to themarket’s reaction were:

Everyone had lost money and•wanted to recoup their losses.

There were few recognised leaders•(four) of the class.

Capacity was scarce.•

All underwriters wrote facultative lines•(each risk was underwrittenindependently and not on a portfoliobasis).

Eleven more years passed before theclass experienced another catastrophicevent and during this time, a moreresilient form of capital in the shape ofcorporate capacity emerged in 1995, tosit alongside the unlimited liabilityMembers of Lloyd’s.

Most think 9/11 was the next big event,however it wasn’t, nor was it the mostcostly for Hull War insurers. On 24 July2001, Tamil Tigers attacked Bandaranikeairport, resulting in a USD382m loss andcontrasting the then USD35m premiumbase.

Most significant was the market’sreaction after this event. With lossestotalling more than ten times the market’spremium, there was a keen desireamongst underwriters to increase rates.

What happened next and how it wouldhave played out had 9/11 not occurred,we will never know. The airline policiesthat renewed in the following sevenweeks experienced rating increases ofonly 25% and not of the quantum soughtby many underwriters.

To compare the post loss market to theone immediately after Kuwait, naturallythere was a desire to recoup lossescoupled with very few leaders, howeverthe significant difference was theabundance of capacity and continuedexistence of broker facilities.

Risk Date ofLoss

Comment

LAM Airlines 29/11/13Suspected suicide(currently settled50/50).

Malaysia (MH370) 08/03/14Unknown cause ofloss (currentlysettled 50/50).

Karachi Airport 08/06/14 Insurgent attack atairport.

Tripoli Airport 13/07/14(Various)

Islamist-led militiaattack at airport.

Malaysia (MH17) 17/07/14 Shot down overUkraine.

Germanwings 24/03/15 Suspected Pilotsuicide.

Yemen 02/04/15Presidential aircraftdestroyed bycoalition bombing.

Felix Airways 28/04/15Aircraft destroyedby fire following anair strike.

SUMMARY OF RECENT MAJORHULL WAR LOSSES

www.jlt.com | Plane Talking 3

Had all accounts renewed in 2001 with a25% rate increase, the market’s incomewould have risen to a meagre USD44m.Needless to say, the events of 9/11altered everything.

Whilst the total Hull War loss for all fouraircraft was only USD130m, the neteffect of the event was an aversion to allWar and Terror classes overnight. Therewas, in effect, a capacity vacuum andwith it, the broker line-slips disappeared.The resulting landscape was akin to postKuwait; there was a resolve to recouplosses, only a handful of leaders and withthe severe scarcity of capacity,underwriters returned to facultativeunderwriting - and the market achieved“payback” for the losses.

Where are we now? Well, much likeLondon busses – you wait for ages andthen three come along at the same time,no major event for nearly 14 years andthen, four in the space of four months!

Initially there was a series of major losses(MH370, Karachi and MH17), then on 13

July 2014, militia attacked Tripoli airport,destroying multiple aircraft over a ten-dayperiod. Two Libyan operators sufferedcatastrophic loss of aircraft, well inexcess of the USD400m aggregatepolicy limit they jointly purchased. Theselosses coupled with fixed and rotor winglosses (estimated at USD100m) made itthe most expensive loss since Kuwait,the ultimate figure easily surpassingUSD700m if including the loss ofuninsured aircraft.

Not surprisingly, underwriters werereeling from the cumulative effect oflosses and brokers approached clients toprepare them for the potential marketbacklash and subsequent uplift inrenewal premiums.

What happened next? The generalmarket expectation was for premiums toincrease. However in order for that tohappen, it required capacity to withdrawand for underwriters to return to basicprinciple of underwriting each riskindividually.

Capacity did not exit and with thepotential of greater premiums a numbereven increased their lines. Meanwhile,others saw what they thought was anopportunity and entered the class.

So, in trying to make sense of where weare now, we do not have the rightingredients required for a correction tothe current inadequate pricing:

Everyone has lost money and wants•to recoup their losses.

However...

The market is not selective and will•effectively follow any number ofleaders in the class.

Capacity is abundant.•

Underwriters continue to follow the•fortunes of the broker line-slips anddo not evaluate each risk, instead,committing to the equivalent of atracker on an annual basis.

Yet again, we find ourselves in a positionwhere losses are greater than ten timesthe annual premium and the market iseffectively where it was in 2001, postAirLanka.

The “Buyer’s Market” will continue untilthe current naive capacity withdraws orbecomes more selective in its riskselection and underwriting.

If history has taught us anything, it hasshown us the need for underwriters andoperators to understand groundaccumulation exposures and not blindlywait for the next catastrophic multiaircraft event.

Continued from page 2

“The “Buyer’sMarket” willcontinue untilthe currentnaive capacitywithdraws orbecomesmore selectivein its riskselection andunderwriting.”

“The past 18 months has beenthe most costly period forAviation Hull War underwriters inthe history of the class. So whyaren’t rates increasing?”

Want to feature in Lead Lines? If so please

contact us at: [email protected]

Renewal Analysis

EXPOSURESThe majority of Q2 renewals showed

some sort of growth in either average

fleet values and or passenger numbers,

albeit at varied levels.

As we have commented before the airline

industry appears to be in good health. In

fact IATA recently predicted that 2015industry profits will almost double thatseen last year, due to a number offactors.

The Paris Air Show also providedoptimism with some significant aircraft

orders placed during the week, ensuring

that manufacturers books remain full for

the foreseeable future.

PREMIUMThe combined premium reduction, on a

like for like basis, for Q2 is down around

-8.8% over the same period last year.

From our analysis of Q2 renewals itwould appear that the majority ofaccounts received some degree ofpremium reduction.

Those accounts that did not, weregenerally based in regions perceived tobe higher risk and or they had adverseloss histories.

RATESThe combined rate reduction for Q2 was

around -11%. Whilst this figure is

someway off of the figure witnessed in

the same period last year of -20%, all

evidence so far in 2015 would seem to

suggest that conditions are slowly

moving towards a return to a similar

environment as seen prior to last years

major losses.

Renewals are being treated on a case-

by-case basis, however it would appear

that this stance could be softening with

recent reductions far more consistent

than was witnessed 6 months ago.

That said we must still be mindful that

the market situation remains fragile.

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q2 2015

Average Fleet Value Passengers

Chan

ge

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q2 2015-

Chan

ge

Hull Liabilities

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q2 2015

A

Chan

ge

Hull Liabilities

4 AEROSPACE | Plane Talking | Q2 2015

Year on Year Exposure % change.Q2. 2014 vs. Q2. 2015 (Like for Like basis), andyear to date. Based on the latest Information asat 30 Jun. 2015. Source: JLT

Year on Year Premium % change.Q2. 2014 vs. Q2. 2015 (Like for Like basis), andyear to date. Based on the latest Information asat 30 Jun. 2015. Source: JLT

Year on Year Rate % change.Q2. 2014 vs. Q2. 2015 (Like for Like basis), andyear to date. Based on the latest Information asat 30 Jun. 2015. Source: JLT

Premium HullUSDm

LiabilityUSDm

TotalUSDm

2014 75 120 195

2015 67 111 179

% Change -10.3% -7.8x% -8.8%

* At lead terms

Renewal Comment

Q1 RENEWALSIncluded in our database for Q2 we have

58 airlines renewing, of which 17 have

expiring average fleet values in excess of

USD1 billion.

The largest renewal of Q2 by someway is

the International Airlines Group (IAG)

which includes carriers such as British

Airways, Iberia, Aer Lingus, LAN and

TAM amongst its consortium members.

Japanese carrier All Nippon Airways was

the second largest renewal of the

quarter, followed by Lion Air, easyJet and

Virgin Australia.

Flag carrier Sudan Airways was a new

addition to the Q2 list following its

renewal in June, the carrier having

extended its policy earlier in the year from

March.

Uzbekistan Airways renewed in June with

a change of broker after switching from

UIB to Willis.

There were also a number of carriers in

Q2 that opted to extend their policies

meaning that they will now renew later

this year. These include, flag carrier

Royal Brunei Airlines which extended

from May to December, Aigle Azur which

extended from April to July and

Cameroon Airlines which extended from

April to September.

From our analysis of Q2 renewals therewas little of note to comment on with nounusual or surprising results witnessed.As mentioned, overall the current marketconditions remain favourable to buyers.

FORTHCOMINGRENEWALS

July is considered the first significant

renewal month of the year for the airline

insurance market, with a large selection

of major airlines and some substantial

accounts renewing.

In July around 45 carriers renew, of these

around half have fleets valued in excess

of USD1 billion. The renewals in July

produce more premium than the first six

months of the year combined and

therefore provide a true picture of market

conditions.

This year, in July, a number of additional

accounts also come to market, having

extended their respective policies earlier

in the year. These include the Hainan

Airlines Group and Aigle Azur both of

which opted to extend their policies

earlier in the year.

The Hainan Airlines Group now replaces

Federal Express to become the largest

renewal in July, with an expiring fleet

valued at around USD20bn.

Sky Airline of Chile comes to market this

year with a change of broker after

switching from Aon to JLT.

Kuwait Airways which usually comes to

market in July opted to extend its policies

meaning that it will now renew in

December.

July Renewals

The 5 largest airline renewals in July are

shown in the table below:

August Renewals

The 5 largest airline renewals in August

are shown in the table below:

September Renewals

Additionally the 5 largest airline renewals

in September are shown in the table

below:


Airline RenewalDate

ExpiringAFVUSD

Hainan Airlines Group 1 Jul 20.1bn

Federal Express 1 Jul 15.0bn

Aeroflot Group 1 Jul 11.7bn

Ethiopian Airlines 1 Jul 5.0bn

Republic Airways 1 Jul 4.2bn

Source: JLT Database

Airline RenewalDate

ExpiringAFVUSD

Alaska Airlines 5 Aug 4.5bn

Pegasus Airlines 24 Aug 2.5bn

Skymark Airlines 1 Aug 2.4bn

Monarch Airlines 1 Aug 1.7bn

Small Planet Airlines 15 Aug 228.0m

Airline RenewalDate

ExpiringAFVUSD

InterJet 9 Sept 2.2bn

Jet Time 1 Sept 462.8m

Windrose 30 Sept 351.1m

Tarom 1 Sept 240.8m

Vistara 11 Sept 237.4m


Loss Analysis

APRIL LOSSES APRIL LOSSSUMMARY*

HULL LOSS ESTIMATE:

USD 92.80m

LIABILITY LOSS ESTIMATE:

Nil

NUMBER OF FATALITIES:

2

0

20

40

60

80

100

APR. 2015APR. 2014

USD

m

Hull Liabilities

All Known Airline Losses Net ofDeductible

4

Yemenia/YemenGovernment 01/04/2015 0 Fatalities

Boeing 747SP(7O-YMN)

Yemen

A presidential B747 aircraft was destroyed whilst parked at Aden Airport, Yemen,when armed militants attacked the airport. Note, the exact date of loss is uncertain.

*Figures shown are provided only as a guide. Notall losses include a reserve estimate and arereflected in the figures. Excludes Hull War hullreserves. Source: JLT.

Gazpromavia 04/04/2015 0 FatalitiesAn-74-200(RA-74056)

North Pole

The aircraft flying in support of a Polar Expedition, made a hard landing at Barneo IceBase near the North Pole, causing structural damage to the undercarriage.

UTAir Express 11/04/2015 0 FatalitiesATR72-212(VQ-BMB)

Russia

Landing at Nizhny Novgorod on a domestic scheduled passenger flight, the aircraftveered off the runway causing damage to a propeller.

Carson Air 13/04/2015 2 FatalitiesSA226 Metro II(C-GSKC)

Canada

The cargo aircraft crashed in wooded terrain whilst performing a flight fromVancouver to Prince George. Both crew members died in the accident.

Jet Airways 13/04/2015 0 FatalitiesBoeing 737-800(VT-JGA)

India

On roll out from landing at Khajuraho, the port undercarriage collapsed leaving theaircraft resting on starboard, nose undercarriage and port engine.

Asiana Airlines 14/04/2015 0 FatalitiesAirbus A320-232(HL7762)

Japan

The aircraft, with 74 passengers and 7 crew, suffered substantial damage to the leftwing, number 1 engine and tail section in a landing accident at Hiroshima Airport.

Wings Air 20/04/2015 0 FatalitiesATR72-600(PK_WGS)

Indonesia

The aircraft suffered a heavy landing at Sumbawa Besar with damage reported tolanding gear and wing/fuselage fitting.

THY Turkish Airlines 25/04/2015 0 FatalitiesAirbus A320-232(TC-JPE)

Turkey

The aircraft suffered substantial damage in a landing accident at Istanbul AtaturkInternational Airport. No fatalities were reported.

Felix Airways 28/04/2015 0 FatalitiesCRJ-701ER(7O-FAA)

Yemen

Whilst parked at Sana Airport, the aircraft was destroyed by fire following an air strikeattack by Saudi led coalition forces.


5

MAY LOSSESMAY LOSS SUMMARY*

HULL LOSS ESTIMATE:

USD 16.75m


Nil


4

0

20

40

60

80

100

MAY. 2015MAY. 2014

USD

m

Hull Liabilities



Air Libya 09/05/2015 0 FatalitiesBAE 146-300(5A-DKQ)

Libya

The aircraft was set on fire by militants during fighting at and near Dahra Airport.

Airbus Defence &Space 09/05/2015 4 Fatalities

Airbus A400M(EC-403)

Spain

The aircraft was performing a manufacturer's test flight when it developed engineproblems and crashed shortly after takeoff. Four of the six crew died. Note as thisloss involved a ‘test’ aircraft the hull claim will be paid under the manufacturer'saviation ‘product liability’ policy.

Joy Air 10/05/2015 0 FatalitiesXIAN MA60(B-3476)

China

The aircraft suffered a runway excursion during landing at Fuzhou Airport whichcaused the wings to fail. No fatalities were reported amongst the 45 passengers and7 crew.

Skywest Airlines 11/05/2015 0 FatalitiesCRJ-200(N932SW)

USA

During the approach to Los Angeles International airport, the port undercarriagefailed to extend. The aircraft was subsequently landed with gear retracted causingdamage to fuselage belly and port wing.


JUNE LOSSESJUNE LOSSSUMMARY*

HULL LOSS ESTIMATE:

USD 4.00m


Nil


5

0

50

100

150

200

JUN. 2015JUN. 2014

USD

m

Hull Liabilities


6


Aeronaves TSM 02/06/2015 5 FatalitiesSA226 Metro II(XA-UKP)

Mexico

The aircraft, performing a post-maintenance test flight with 3 passengers and 2 crew,crashed shortly after takeoff from Queretaro Airport. There were no survivors.

Trans MaldivianAirways 11/06/2015 0 Fatalities

DHC-6-300F(8Q-MAP & 8Q-TMG)

Maldives

Two float equipped Twin Otter aircraft collided. Aircraft 8Q-TMG, was water taxiingfrom a dock when its propeller struck the rudder of the stationary aircraft, 8Q-MAP,causing significant damage to the rudder and propeller/engine.

Scat Airlines 16/06/2015 0 FatalitiesBoeing 737-300(LY-FLB)

Kazakhstan

The aircraft had been unloaded following a domestic flight from Astana to Aktau andwas being prepared for the next flight when a fire broke out in the forward cabincausing substantial damage.

Loss Summary

HULL ALL RISKSAfter an unfortunate first quarter in the

aviation industry in terms of high profile

losses, we continued to experience

losses in the second quarter. Fortunately

the majority of these losses involved little

or no loss of life, however they still

provided the market with some

significant claims.

The two largest losses of the second

quarter came in April and were the result

of landing accidents with both of the

aircraft being declared a Constructive

Total Loss (CTL) due to the extent of

damage each sustained.

Whilst the market experienced other

runway/landing accidents in the second

quarter, they were all relatively minor in

value in comparison.

Another loss worthy of note in the

second quarter was that of the new

Airbus A400M aircraft which crashed

whilst on its first pre-delivery test flight.

As this loss involved a ‘test’ aircraft the

significant hull claim, in excess of

USD100m, will be paid under the

manufacturer's aviation ‘product liability’

policy.

The losses in the second quarter now

bring the combined 2015 Hull and

Liability figure at around USD610 million

for the year to date (excluding

attritionals).

These recent losses will continue to keep

pressure on the market, but at present

they appear to have caused little change

in market conditions.

HULL WARAfter witnessing a string of Hull War

incidents at the start of 2015, loss activity

continued throughout the second

quarter.

Similarly to the Karachi and Tripoli airport

incidents witnessed in 2014, there were

a number of Hull War losses in the

second quarter involving aircraft which

were destroyed whilst parked at various

airports during fighting.

Two of these losses took place in Yemen

albeit at different airports, the largest of

which involved a Yemenia Airlines

presidential B747 aircraft which was

destroyed. There were also further losses

witnessed in Libya.

The losses experienced in the second

quarter bring the 2015 Hull War loss

figure to around USD71 million for the

year to date. We must note that this

figure only includes known and

confirmed losses and as fighting

continues in these regions we expect

further claims to filter through.

Despite recent losses in the sector the

Hull War market appears to have, for

now at least, stabilised. We are once

again seeing reductions or “as before”

pricing and it is clear that conditions have

softened. That said we must reiterate

that renewals continue to be treated on a

case by case basis, therefore the results

seen still remain extremely varied.

Hull War capacity remains plentiful,

however we have recently witnessed

some smaller markets withdraw or opt to

stop writing the coverage, as they now

deem the business unprofitable. Whilst

this does little to impact overall levels,

underwriters are becoming increasingly

concerned with rising claims in this

sector and a continuation of losses could

well have a greater impact on both

capacity levels and ultimately pricing

within the sector going forward.

Q2 LOSS SUMMARY

**Figures shown are provided only as a guide. Hull& Liability combined, includes an attritional estimateand excludes hull reserves for Hull War losses.Source: JLT.

0

50

100

150

200

Q2 2015Q2 2014

USD

m

Hull Liabilities

All Known Airline Losses Net ofDeductible*


Q2

0

500

1000

1500

2000

2015 YTD2014 20132012

USD

m

5 Year Average

2012 - 2015 YTD vs. 5 YearAverage Losses**


NEW MARKET - FIDELIS INSURANCEHOLDINGS

Fidelis Insurance Holdings Limited(Fidelis), a newly formed specialtyinsurance and reinsurance providerhas announced that it has securedapproximately USD1.5 billion in equitycapital, from three private-equity firmsand other investors.

This marks one of the largest industrycapital raises ever, and immediatelymakes Fidelis an important newunderwriter in the global market.

The Company has recently received anAM Best rating of “A-” (Excellent).

Fidelis was founded by Britishinsurance-industry veterans, RichardBrindle, who will serve as Group CEOand CUO, and Neil McConachie, whowill be Group CFO. Previously, bothBrindle and McConachie enjoyedsuccess as founding members ofLancashire Holdings.

The company announced that it wouldapproach the insurance andreinsurance business differently thanmost traditional insurers. The resultingbusiness model that Fidelis will followfeatures “an innovative structure totactically shift capital betweeninsurance and investments based onprevailing market dynamics.”

Fidelis will underwrite a book ofinsurance and reinsurance business,with a focus on specialty classes ofbusiness where its team has significantexperience, such as the property,energy, marine and aviation riskclasses.

The Company said it expects to beginunderwriting immediately.

BARENTS RE TO ENTER THEGENERAL AVIATION MARKET

Barents Re entered the GeneralAviation Insurance market 1 May 2015as a supporting carrier. Barents Re is aPanamanian Reinsurance companywith a Paris branch office. Thecompany has a financial strength ratingof “A-” (Excellent) with positive outlookfrom AM Best.

CNA HARDY TO EXIT AVIATIONMARKET

Insurer CNA Hardy ceased writingAviation insurance business with effect1 May 2015, following a strategicreview of its portfolio.

In a press release the insurer said “Areview of our current book of aviationbusiness confirmed that to maintainrelevance and achieve a balancedportfolio we would need to grow ouraccount significantly. Given challengingmarket conditions and the availabilityof capacity, it is apparent that we willstruggle to increase market sharewhilst building a profitable book ofbusiness. In addition, the firming ofrates and terms and conditions hasn’tmaterialised to the degree we hoped.We are committed to maintainingunderwriting discipline and for thisreason we have made the strategicdecision to withdraw from the Aviationsector with immediate effect.”

AXIS-PARTNERRE DEAL CLEAREDBY EUROPEAN COMMISSION

Axis and PartnerRe have received allcompetition-related approvals requiredfor the completion of their merger.

The transaction remains on track toclose in the third quarter of 2015,subject to approvals by shareholders,regulatory clearances and conditions.

News continued on page 11 ��


Market News

SIGNIFICANT RATINGSCHANGES

Ratings agency AM Best has•

revised the outlook of specialty

insurer Torus to stable from

negative. At the same time the

rating agency also affirmed Torus’

“A-” financial strength rating.

Ratings agency Standard & Poor’s•

(S&P) has assigned Ageas

Insurance Limited an “A-“ rating

with a positive outlook.


affirmed the financial strength

rating of “A” (Excellent) and the

issuer credit ratings of “a” of

Markel Bermuda Limited and its

affiliated operating companies.



rating (FSR) of “A” (Excellent) and

the issuer credit rating (ICR) of

“a+” of Amlin AG, the FSR of “A+”

(Superior) and the ICR of “aa-” of

Lloyd’s Syndicate 2001, which is

managed by Amlin Underwriting

Limited, and the ICR of “a-” of

Amlin plc, the non-operating

holding company of the Amlin

group of companies. The outlook

for all ratings is stable.



rating of “A” (Excellent) and the

issuer credit ratings of “a” of

Endurance Specialty Insurance

Ltd. and its subsidiaries. The

outlook for all ratings is stable.

TORUS PARTNERS US MGA TOWRITE GENERAL AVIATION

Torus announced that it has partneredwith Seattle-based managing generalagent (MGA) London AviationUnderwriters (LAU) to write generalaviation (GA) business throughout theUS. Coverage will be written on behalfof Torus National Insurance Company.

LAU has written GA throughout the USsince 1980 and specialises in airportpremises liability and non-ownedaircraft liability.

Torus said it is approved to write GA inthe majority of its targeted US states.The process to have remaining targetstates approved is under way, theinsurer added.

John Shettle, vice-chairman of Torusand CEO of Torus US, said thepartnership will be a long-termarrangement. “While Torus has been asignificant writer of aviation insuranceglobally, we have not historically had asignificant GA presence in the US,” hesaid.

EASA, IATA MOVE TO REDUCE RISKOF LOSS OF CONTROL ACCIDENTS

The European Aviation Safety Agency(EASA) and the International AirTransport Association (IATA) hasannounced new training requirementsfor airline pilots to prevent loss ofcontrol situations.

The “upset prevention and recoverytraining” (UPRT) requirements aim toimprove safety standards by mitigatingloss of control in-flight (LOC-I)accidents. The requirements based onICAO standards and practices havebeen developed in consultation withindustry experts. All European airlinesand commercial business jet operatorsare required to implement theseprovisions by April 2016.

TOKIO MARINE TO ACQUIRE HCCINSURANCE (HHC)

Tokio Marine Holdings announced thatit has agreed to buy US specialtyinsurer HCC Insurance Holdings Inc.(HHC) for USD7.5 billion, making theacquisition the largest ever by aJapanese insurer.

The transaction is expected to close inthe fourth quarter, subject to approvalby HCC’s shareholders and regulators.

US AVIATION AUTHORITY TO REVIEWPILOTS' MENTAL HEALTHSCREENING

The US Federal Aviation Administration(FAA) said in a statement that it hasinstructed its Pilot Fitness AviationRulemaking Committee (ARC) to makerecommendations on how to betterscreen the safety of pilots flying inAmerican airspace within the next sixmonths.

It said the study, which is to beconducted by FAA officials andrepresentatives of the private aviationindustry, was aimed at finding moreeffective ways of monitoring the mentaland emotional health of pilots.

The ARC, which according to the FAAstatement, is to include both Americanand international "aviation industryexperts," is to be tasked withexamining not only the methods ofevaluating pilots' mental health, butalso barriers to reporting anysuspected issues. It will analyse thefindings of the study and will providerecommendations within six months.

Based on the receivedrecommendations, the FAA mayconsider changing policies andprocedures regarding pilot training andtesting, but also pilot medicalrequirements as well as cockpit andaircraft design, according to thestatement.


AVIATION ARRIVALS &DEPARTURES

Mark Champion has left his•

position in the Willis Aviation team.

Edward Louth has left his position•

in the Marsh Aviation team to join

Antares.

Lee Gladden has left his position•

at XL to join Mitsui.

Vanessa Powell has left her claims•

position at Mitsui Sumitomo to join

Altitude Risk Partners.

Simon Tardif has left his position•

at La Réunion Aérienne to join

Swiss Re Paris.

Mike Barrett, has left his claims•

position at AIG to join the USAIG

team as Senior Vice President,

Claims Attorney.

Chris Hurdle has left his position•

at Lockton to join Aon.

Philip Coldwell has resigned from•

his position at AIG to join start-up,

Fidelis Insurance.

Ken Forsyth has joined Crawford•

Global Technical Services (GTS)

as managing director Aviation -

the Americas.

Clyde & Co announced that Craig•

Rooney, Fabrice Pradon, and

Trudy Seow, have been promoted

to Partner status.

Bob Duke has left his position at•

GAB Robins.

Continued from page 10


JLT AEROSPACE TRAININGSEMINAR 2015JLT held its 8th annual AerospaceInsurance Training Seminar in Londonfrom 15 to 18 June 2015.

Having now run the seminar for sometime now, we know that delegateslearn a great deal that is applied whenthey return to their day-to-day roles,helping increase the level of insuranceknowledge in their companies. We feelthat educating our clients and partnersis an important part of our role.

This year’s seminar was attended byover 40 delegates from differentcountries around the world.

The seminar covered all aspects ofAviation Insurance with qualityspeakers from all disciplines of themarket, complimented by manyprofessional presentations made bymembers of the JLT team.

Seminar attendees not only benefitfrom the knowledge they gain from thecourse itself, but also fromopportunities to network with a rangeof people who work in the Londonaviation insurance market, which canprove a significant benefit.

Importantly time was still found forsocial events which helped make thisyear’s Seminar both rewarding andfun. The highlight of this year’s eventbeing a trip to Duxford Aerodrome,complete with a unique flypast of theGrace Spitfire, a wonderful piece ofAviation history.

We would like to take this opportunityto thank all of the delegates thatattended and to thank all ourinstructors and speakers thatcontributed and helped to make theseminar such a great success.

We look forward to next year’s event.

IATA REVISES ITS 2015 INDUSTRYOUTLOOK

The International Air TransportAssociation (IATA) has raised itsforecast for 2015 industry profits bymore than 17% to USD29.3 billion,almost double that seen last year.

Revenues in 2015 are expected atUSD727 billion, which would see theindustry achieve a 4% net profitmargin.

IATA said the significant strengtheningreflected the net impact of severalglobal factors, including strongerglobal economic prospects, recordload factors, lower fuel prices, and amajor appreciation of the US dollar.

IATA had previously forecast a USD25billion 2015 profit earlier in the year.

All regions are expected to see animprovement in profitability in 2015compared with 2014, but there are,however, stark differences in regionaleconomies, which are also reflected inairline performance, the industry bodycautioned.

Over half the global profit is expectedto be generated by airlines based inNorth America, more than double thatof the next best performing regions ofEurope and Asia-Pacific.

“For the airline business, 2015 isturning out to be a positive year. Sincethe tragic events of September 2001,the global airline industry hastransformed itself with major gains inefficiency. This is clearly evident in theexpected record high passenger loadfactor of 80.2% for this year. The resultis a hard-earned 4% average net profitmargin. On average, airlines will retainUSD8.27 for every passenger carried,”said Tony Tyler, IATA’s Director Generaland CEO.

ACE TO BUY CHUBB

ACE is set to buy insurer Chubb forUSD28.3bn. The deal will see ACEshareholders own 70% of thecombined company, with Chubbshareholders owning 30%. TheChubb brand set to be kept and thedeal is set to be completed by the firstquarter of 2016.

JLT AEROSPACE MAKE NEWAPPOINTMENTS

JLT are pleased to announce thefollowing new recruits will join ourAerospace team at various datesduring the coming months afterserving their respective contractualnotice periods:

Stuart Nelson joins us from WillisAerospace where he was Head ofContract Advisory (Wordings). Stuartwill perform a similar role as a Partnerat JLT, working closely with ourexisting team to develop our wordingscapability.

Andy Barker will join our Aerospaceclaims team as a Partner, providingadded strength and depth to ourexisting claims capability. Andy joins usfrom Allianz where he was a SeniorAviation Claims Expert.

Ben Spain joins us from GlobalAerospace where he worked as aSpace Underwriter. Ben’s primaryfocus at JLT will be as an Associatewithin our space team, in addition toproviding business analyst support inother areas.

JLT ranks amongst the very bestresourced brokers in the aviationsector and these latest recruits reflectour ongoing commitment to providingthe highest quality of service to ourclients.


PARIS AIR SHOW 2015

The 51st Paris Air Show took place atLe Bourget Airport from 15 to 21 June.

This event, over a hundred years old, isthe largest and longest-runningaerospace trade show in the world.

This year some 351,000 people fromthe aerospace industry and the generalpublic were present, an 11% increaseon the attendance in 2013.

One of the main talking points of any ofthe big industry Air Shows is who willget the most aircraft orders, Airbus orBoeing?

At the last show in 2013, Airbusnotched 466 commitments, includingsome finalisation announcementsvalued at USD68.7 billion. Boeingwasn’t far behind, winning 442commitments at a value of aboutUSD66 billion.

This year, Airbus racked up USD57billion worth of business for 421aircraft. The announcement of a latedeal with European low-cost carrierWizz Air for 110 A321neos, worthmore than USD12.5 billion at list pricesput the France-based manufacturerahead of rival Boeing in financial terms.It was the show's single biggest order.

Boeing recorded orders andcommitments for 331 planes worthUSD50.2 billion. Its biggest deal waswith Dutch leasing company AerCapfor 100 737MAX-8 aircraft, worth up toUSD10.7 billion at list prices.

Total orders and commitmentsamounted to USD107.2 billion of newbusiness for the two companies. Thistotal was USD8.3 million down on thevalue of deals secured by Airbus andBoeing at last year’s Farnborough AirShow. However the number of aircraftordered was higher, with 752 this yearcompared with 697.

In the regional sector, Bombardierwould have been hoping for someorders after showing off its newCSeries aircraft for the first time, butnone came. Bombardier announcedonly one new firm order during theshow, selling six Q400 turboprops toCanada's WestJet Airlines.

Meanwhile, Bombardier’s rival in theregional jet arena, Brazil’s Embraerannounced USD2.6 billion in deals,including orders for its new revampedE1 and E2 regional jets.

Regional manufacturer ATR faired wellannouncing 46 firm orders and 35options worth a combined total ofaround USD1.98 billion. ATR has nowexceeded 1,500 firm orders since thebeginning of its turboprop programme.

Asia was the most active region,accounting for around half the totalairline commitments during the show.This was followed by the Middle Eastand South America.

Whilst much of the Paris Air Show isdominated by the commercial sector,its military sector is considered animportant part of the event.

This year, Dassault's Rafale jet fighterwowed the crowds with an acrobaticdisplay. The Airbus A400M also madea surprise appearance, after onecrashed in May whilst on a test flight.This time round, the aircraft displayedits capabilities with an impressivedemonstration.

A number of other innovations andconcepts were also announced duringthe show including Airbus’ planned X6heavy-lift helicopter, Textron’s Scorpionfighter jet, new drone/UAV systems,and various satellite and softwaretechnology solutions

THE 5 LARGESTCOMMERCIAL AIRCRAFTORDERS BY CUSTOMER(INC. OPTIONS)

Wizz Air placed the shows biggest•

order for 110 Airbus A321neo

aircraft worth USD13.7 billion at

list prices. The order also includes

purchase rights for a further 90

aircraft.

Korean Air placed orders for a•

total of 50 737 MAX-8 (30 firm, 20

options) and two 777-300ER jets

from Boeing and 50 A321neo

aircraft (30 firm, 20 options) from

Airbus. The deals are valued at

approximately USD12.2 billion

AerCap, the aircraft lessor, placed•

an order for 100 Boeing 737

MAX-8 aircraft valued at around

USD10.7 billion at list prices.

Garuda Indonesia signed letters of•

intent with Boeing for 30 787-9s

and up to 30 737 MAX-8s, and

with Airbus for 30 A350 XWB, a

deal which together is worth

almost USD20 billion at list prices.

Synergy Group signed a letter of•

intent for 62 Airbus A320neo

aircraft for its Avianca Brazil unit.

WHO WON THE ORDERBATTLE?

Airbus triumphed with USD57bn•

worth of orders and commitments

for 421 aircraft,

This was slightly ahead of Boeing•

who agreed orders and

commitments for 331 planes with

a value of just over USD50bn.

14 AEROSPACE | PLANE TALKING | Q2 2015

CONTACTS

SUBSCRIPTIONS & GENERAL QUERIES

[email protected]

EDITORIAL TEAM

Richard Adams Aerospace, JLT Specialty Limited+44 (0) 207 466 [email protected]

Brad Hills Aerospace, JLT Specialty Limited+44 (0) 207 466 [email protected]

BUSINESS CONTACTS

Nigel Weyman Aerospace, JLT Specialty Limited+44 (0) 207 466 [email protected]

William Smith Aerospace, JLT Specialty Limited+44 (0) 207 466 [email protected]

JLT Specialty Limited provides insurance

broking, risk management and claims

consulting services to large and

international companies. Our success

comes from focusing on sectors where we

know we can make the greatest difference

– using insight, intelligence and imagination

to provide expert advice and robust - often

unique - solutions. We build partner teams

to work side-by-side with you, our network

and the market to deliver responses which

are carefully considered from all angles.

JLT Specialty LimitedThe St Botolph Building138 HoundsditchLondon EC3A 7AWwww.jlt.com

Lloyd’s Broker. Authorised and regulated by the FinancialConduct Authority. A member of the Jardine LloydThompson Group. Registered Office: The St BotolphBuilding, 138 Houndsditch, London EC3A 7AW.Registered in England No. 01536540. VAT No. 244 2321 96.

© June 2015

This publication is compiled and published for thebenefit of certain clients for whom companieswithin the Jardine Lloyd Thompson Group act asagent or consultant. It is intended only to highlightgeneral issues relating to the subject matter whichmay be of interest and does not necessarily dealwith every important topic nor cover every aspectof the topics with which it deals. It is not designed to provide specific advice on the subject matter.

Views and opinions expressed in this publicationare those of Aerospace unless otherwise stated.Whilst every effort has been made to ensure theaccuracy of the content of this publication, neither

Aerospace nor any other company within the Jardine Lloyd Thompson Group accepts responsibility for any error, omission or deficiencyin its content. If you intend to take any action ormake any decision on the basis of the content of this publication, you should first seek specificprofessional advice.

This document is protected by copyright law.Unauthorised reproduction, copying and distribution of this document or any part of it may result in civil and criminal penalties and will beprosecuted to the maximum extent permittedunder law.

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JLT is always looking to improve the services and information we provide to ourreaders. We value your opinion and welcome your feedback on our Plane Talkingpublication. Should you have any feedback please contact us at:[email protected]

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