Aviation insurance broker NationAir Aviation Insurance released its annual analysis of the aviation insurance market. It said it believes 2013 marked another year of relatively soft market (low) rates in all sectors of general aviation and that attention to expenses by insurers mean rates should remain stable going forward.While the market conditions have remained the same for several years, the reasons for that soft market are changing. At first, increased market competition pushed rates down. Now, however, rates are being held down by the more long-term forces of structural overcapacity, and thankfully, favorable loss history. While conventional thinking was that falling rates would eventually push aviation insurers into the red, causing a push for rate increase, insurers have instead been able to stay profitable even at lower rate levels. Lower interest rates, which require insurers to focus more on underwriting profits, were also thought to be a future justification for eventual rate increases.
Company President Jeff Bauer, who issued the report, pointed out that over the last two years, we have seen many insurers attempting to make a profit on a smaller piece of the pie, and for the most part they have succeeded. While expense control spurred some of that success, insurers have stayed in the black primarily due to the absence of significant general aviation fatality accidents. As long as this continues, we do not anticipate any real pressure for rate increases. The report went on to say that the worlds reinsurers, which are quite profitable, are not exerting any significant pressure on insurers through the premiums they charge for reinsurance. And many insurers are buying less reinsurance anyway.There now seems to be an equilibrium: All parties are rather satisfied with their share of the insurance pie; there is little incentive to start a rate war to increase market share.
