Positive renewals outcomes ahead as market conditions favour airline insurance buyers: Gallagher Specialty

Despite ongoing challenges, excess capacity and increased competition are driving rate softening for airline insurance as the market reaches the midpoint of the year, according to Gallagher Specialty.

Lower average claims alongside the higher rates seen in recent years have attracted capacity back into the market, generating increased competition and pursuit of market share to the detriment of underwriting discipline, analysts have noted

Now, the majority of insurers are actively seeking to write more premium volume. However, Gallagher warns: “for long term players, this pursuit of premium is driven by profitability pressures and squeezed profit margins, exacerbated by increased retentions and a growing divergence between the insurance and reinsurance market pricing.”

Analysts foresee that, in the coming months, insurer management will be closely monitoring rating adequacy and may start to raise questions as to the best place to allocate capital going forward.

A more competitive pricing environment benefits airline insurance buyers, and “for now, the increased competition is resulting in more positive renewal outcomes,” according to Gallagher analysts.

Who added: “We expect this ‘buyer’s market’ will continue in the short term, but several very major matters remain unresolved, not least potential lessor claims, which may negatively influence future capacity and underwriting sentiment once the market has greater clarity.”

As a side note to capacity, analysts have also seen significant personnel movement again amongst insurers, with many experienced underwriters and product heads switching companies.

These moves could lead to some challenges, with some of these individuals just getting settled in, others are on gardening leave, and some insurers are actively recruiting to restaff their depleted teams.

Gallagher stated: “During this transition period, there are, inevitably, questions about future underwriting plans and what this means, but, at this point, it is premature to say what impact (if any) this recent activity will have on those markets concerned.”

Looking ahead, analysts believe uncertainty will continue in the airline insurance market, which will also see challenges and renewal complexities.

Gallagher analysts concluded: “In the absence of any new developments, losses or significant shocks to the market, our view is for a continuation of current trends into Q3 2024. Market conditions are in the buyer’s favour and most clients should experience more positive renewal outcomes.

“Several very major matters remain unresolved, not least potential lessor claims, which may negatively impact future capacity and underwriting sentiment once the market has greater clarity.”

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