Rate pressure continues in aviation insurance: Gallagher Re

The Jeju Airline loss calls for revising airline insurance pricing.

Gallagher Re’s reinsurance market on 1 January began with ample capacity, leading to healthy competition amongst reinsurers. 

Non-proportional reinsurance capacity was abundant, allowing buyers to exert greater pressure on terms. 

Buyers benefited from more options in structure and pricing, with some placements incorporating a mix of subscription and verticalised pricing. Excess of loss pricing softened slightly due to increased supply.  

Quota share placements saw stable capacity levels, though reinsurers closely monitored portfolio mix, back-year loss deterioration, and commission rates. 

Meanwhile, the trapped aircraft in Russia and associated claims remain a significant concern amidst ongoing uncertainty.  

In the direct market, strong capacity levels and an influx of new players contributed to rate reductions. Airline operators experienced double-digit rate cuts, with vertical discounting prominent as new entrants sought market share. 

The Jeju Airline loss on 29 December 2024, is expected to impact 2024 underwriting and intensify calls for revising airline insurance pricing. 

Whilst the claim quantum is not yet determined, this loss is anticipated to deepen the airline underwriting deficit.  

The general aviation market experienced similar pricing pressure as insurers diversified portfolios. 

Overcapacity continued to influence the products manufacturing segment, although pricing was less affected compared to the airline and general aviation sectors.  

Aviation hull war and third-party liability markets also faced significant rate pressure during Q4 renewals, with rate reductions of approximately 10%. 

Increased competition, driven by the entry of all-risk markets and expanded line slips, further strained incumbents. 

Despite this, reinsurers maintained discipline in deploying capacity and pricing. Most renewals saw modest reductions, with retention levels and vertical limits remaining steady. 

Absent significant developments, this environment is expected to persist through 2025.