THE NEWSLETTER FOR THE AIRLINE INSURANCE INDUSTRY
September 2013
AIRLINE INSURANCE MARKET
As people return from the annual holiday
period and the airline insurance renewal
season begins there will be an expectation
of a flurry of activity between now and the
end of the year. People will likely have
been contemplating a whole host of things
and may well decide to make some
changes! One thing unlikely to change
however is the airline insurance market
direction, as it continues to experience a
period of stability that has led to
opportunities for brokers and buyers to be
creative and innovative in order to
maximise the sustained favourable
conditions.
Capacity remains abundant with aviation
being clearly viewed as an area where
insurers can generate a return despite the
declining premium levels. This is
particularly true when combining their
overall aviation insurance portfolio. It is
clear that the industry is safer, despite
some recent accidents losses and fatalities
remain low.
Exposures will continue to grow as the
mood of improved economic conditions
gives the consistent single digit exposure
growth a further boost.
It is likely that consolidation will continue
and as a result there will be further erosion
of premium and leverage through
economies of scale.
The favourable conditions are creating a
situation where the purchase of airline
insurance is viewed as increasingly short
term by an industry that has a long term
view. Differentiation of price for brokers
and insurers is a challenge in a situation
when it appears everyone is offering an
acceptable deal. The real differentiator is
still in service that is provided which
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varies widely between brokers and
underwriters.
Differentiation for buyers is also a
challenge when the cost of
catastrophe insurance has become so
low. When everyone is performing
how do you truly demonstrate you are
out-performing the market?
RECENT RENEWALS
CONTENTS
AIRLINE INSURANCE
MARKET OVERVIEW………1
MARKET NEWS…………….3
INDUSTRY NEWS………….4
July saw 34 renewals come into the
LOSSES OVERVIEW………7
market. The largest of these renewals
were American Airlines & US Airways,
FORTHCOMING
the latter cancelling and replacing its
RENEWALS………………....9
December policy. Due to the, now
challenged, merger process starting,
these programmes were marketed
together to receive maximum savings.
This policy heavily influenced the
premium and rating movements in July,
and if you exclude these programmes the
premium reduction for July falls to 12.5%
and the premium movement for the year
falls to 7.7%.
August saw six renewals, the largest being
Alaska Airlines which has an average fleet
value (AFV) just below US$4.5 billion. Other
major renewals with AFV's over US$1 billion
were Monarch Airlines, Skymark Airlines &
Pegasus Airlines. August saw the AFV for
the six renewals have an average increase
of 14%, with passenger numbers declared
increasing by 12%. This equated to nearly a
10% reduction in premium, which meant the
rate reductions were approximately 20%.
There is only a small amount of activity in
September, with 11 renewals expected. The
largest renewal in September is InterJet
airlines, which has moved broker from Aon to
Marsh. National Air Cargo extended into
September from June, and this will be the first
renewal since its loss on 29th April.
2013 NET % PREMIUM AND EXPOSURE MOVEMENTS (HULL & LIABILITY)
2012 Net
Premium
US$ m
$
5.55
2013 Net
Premium
US$ m
$
7.95
US$ m
Premium
Premium
% Change
Change
$
2.40
43.3%
0%
$
$
$
1.32
26.3%
17%
9%
$
35.68 $
35.37 $
-0.31
-0.9%
16
17%
8%
$
46.24
$
49.65
$
3.41
7.4%
April
14
6%
5%
$
108.87
$
103.92
$
-4.95
-4.5%
May
15
9%
15%
$
65.28 $
58.68 $
-6.60
-10.1%
June
16
0%
-1%
$
30.78 $
27.11 $
-3.67
-11.9%
Q2
45
6%
8%
$
204.93 $
189.71
$
-15.22
-7.4%
July
34
8%
9%
$
225.76
186.18
$
-39.58
-17.5%
August
6
14%
12%
$
29.42 $
26.50 $
-2.92
-9.9%
101
8%
9%
$
506.35 $
No. of
Renewals
AFV %
Change
January
3
21%
February
3
20%
March
10
Q1
2013 Total
PAX %
Change
5.01
$
6.33
452.04
$
-54.31
-10.7%
WORLDWIDE AIRLINE HULL & LIABILITY PREMIUM AND CLAIMS ON A CALENDAR YEAR BASIS
Net Premium*
Claims**
Loss Ratio
250%
$3,000
225%
$2,500
200%
Attritional
175%
$2,000
Attritional
150%
Liab
$1,500
100%
Attritional
$1,000
$500
$0
Hull &
Spares
Liab
Hull &
Spares
2010
Net Premium*
$2,000
Claims**
$2,512
Loss Ratio
Attritional
75%
Liab
50%
Attritional
Liab
Hull &
Spares
2009
Est Att Losses
125%
Liab
Liab
Hull &
Spares
Hull &
Spares
2011
2012
2013
$2,065
$1,913
$1,673
$452
$1,970
$1,217
$936
$1,064
125.6%
95.4%
63.6%
56.0%
235.4%
$450
$450
$450
$450
$450
25%
0%
* Premium includes all known airlines with an AFV in excess of US$100m and is based on Net London Lead Terms; it is subject to
change as more information becomes available.
** Claims shown include the estimated figure for attritional losses. Products/Airport/ATC portion of losses is not included, this shows
Airline Hull & Liability claims only. Claims are updated as more information becomes available.
2|Page
MARKET NEWS
ENSTAR GROUP LIMITED TO ACQUIRE TORUS
INSURANCE HOLDINGS LIMITED
Enstar Group Limited (“Enstar”) (Nasdaq:ESGR)
announced on 9 July 2013 that it has entered into
a definitive agreement to acquire global specialty
insurer Torus Insurance Holdings Limited (“Torus”).
Torus is the holding company of six wholly owned
insurance vehicles, including one Lloyd‟s
syndicate. The total consideration for the
transaction is US$692 million.
Enstar will issue approximately 1,901,000 ordinary
voting shares and approximately 711,000 newly
created non-voting preferred shares having an
aggregate value of approximately US$346 million
to partially fund the purchase price. Enstar will also
contribute approximately US$69 million in cash
towards the purchase price, with affiliates of Stone
Point Capital LLC (“Stone Point”) funding the
remaining approximately US$277 million through
an equity co-investment. Following the closing of
the transaction, Enstar will own 60% of Torus and
Stone Point will own 40%.
ANDREW BRATBY AND STEPHEN PEAK TO
JOIN WILLIS
Andrew Bratby and Stephen Peak are to join the
Willis Advisory Service Team from Marsh once
their contractual obligations have been completed.
MAX COX MOVES TO WILLIS
Max Cox has joined Willis from Marsh where Max
was working as a Broker. Max will be working on
the European team and brings with him a wealth of
experience from his time at Marsh.
DAVID GODLEY, TIM WRIGHT & RICHARD
POWER RESIGN TO JOIN BARBICAN
SYNDICATE
David Godley and Tim Wright have resigned from
their posts at Global and Richard Power from his
post at Catlin to start writing Aviation Insurance for
Barbican syndicate. David has been sent home on
3 months’ notice and will start his new role in
October. Tim has been sent home to see out his
notice period. Richard is working his six month
notice. We have been advised that Barbican will
begin Underwriting from 1st January 2014.
SIMON ABBOTT RESIGNS FROM ACE TO JOIN
GLOBAL
Simon Abbott has resigned from his position at
ACE to join Global. Simon has a 6 month notice
period and will start at Global once he has
completed his contractual obligations.
Andrew Bratby has led the Marsh Advisory Team
for 16 years and has considerable contractual
expertise in the Aviation Industry. Stephen Peak
has been at Marsh for 2 years in a contractual
advisory role and is a qualified aviation and asset
finance lawyer.
STEVE HAZARD JOINS SWISS RE
STEPHAN ROESS TO JOIN WILLIS
ANNIE COLBURN LEAVES AON TO JOIN
MARSH
Stephan Roess is to join the Willis team in
Vancouver team as a Senior Vice President after
completing the contractual responsibility with
Catlin. Stephan joins from Catlin Calgary where he
held the position of Senior Claims Examiner.
Stephan has extensive experience in the claims
and Account Executive arena and during a
decorated career he has worked as an adjuster
with McLaren's, a Claims underwriter and senior
client broker with Marsh.
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Steve Hazard has resigned from his Underwriter
role at CV Starr and will be joining Swiss Re as
soon as he has completed his contractual
obligations.
Annie Colburn has moved from Aon to Marsh to
work as a broker on the Aerospace team, working
alongside Oyin Heath.
DAVE WATTS RESIGNS FROM CATLIN
CALGARY TO JOIN TRAVELERS
Dave Watts has resigned from Catlin Calgary to
join Travelers in London. Dave will be replacing
Jason Jenkins as Head of the General Aviation
team.
INDUSTRY NEWS
US GOVERNMENT CHALLENGES AMERICAN-US
AIRWAYS MERGER ON COMPETITIVE
GROUNDS
The US Department of Justice (DOJ) has
challenged the proposed merger of American
Airlines and US Airways, citing the deal's potential
to reduce competition and increase airfares in the
USA.
Approximately 15 minutes into the flight, the pilots
discussed high clouds surrounding the flight path,
before the pilot reported to Medan director
controller at 20min 53s - according to the cockpit
voice recorder (CVR) - that it was reaching 8,000ft
and establishing contact with Kutacane.
The pilot's three attempts to contact Kutacane
radio at 24min 54s, however, were not met with a
reply.
"The department sued to block this merger
because it would eliminate competition between
US Airways and American and put consumers at
risk of higher prices and reduced service," says
Bill Baer, assistant attorney general in charge of
the DOJ's antitrust division, in a statement.
Analysis of the CVR found that soon after that
radio call, the two pilots decided to fly into the
clouds as a suitable gap could not be found. This
was then followed by another discussion asking if
the aircraft had passed an unidentified point,
possibly indicating a loss of visual reference.
The DOJ, joined by the district attorneys from
Arizona, Florida, Pennsylvania, Tennessee,
Texas, Virginia and Washington DC, filed suit
challenging the proposed merger with the US
District Court for the District of Columbia today.
Shortly after that, the CVR stopped recording as
the aircraft impacted a 70º slope ridge, causing
significant damage to the bottom part of its
forward fuselage and killing all on board. The
NTSC noted that it is likely that the aircraft flew
into the terrain without the pilots taking any
recovery action, such as pulling the aircraft's nose
up.
The suit cites the combined carrier's control of
69% of the take-off and landing slots at Ronald
Reagan Washington National airport as an
example of the concentration that would result
from the merger. It says that fares in the
Washington DC area would likely increase and
that there would be less air service as a result of
the merger.
American and US Airways had hoped to close the
merger by the end of the quarter, pending DOJ
antitrust approval.
The US bankruptcy court is poised to confirm
American's reorganisation plan, which is centred
on the proposed merger, on 15 August.
Source: Flight Pro
LACK OF SITUATIONAL AWARENESS LED TO
NUSANTARA BUANA C-212 CRASH: NTSC
The main contributor to a fatal controlled flight into
terrain accident in 2011 was a lack of situational
awareness by the pilots of an Indonesian
Aerospace C212-200 operated by Nusantara
Buana Air.
The aircraft, registered PK-TLF, was operating a
charter flight from Medan to Kutacane in
southeast Aceh province on 29 September 2011,
carrying two crew and 16 passengers on board,
says the final report from Indonesia's National
Transport Safety Committee (NTSC).
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The NTSC observed that the pilots' discussion on
the weather meant that the flight did not meet the
minimum requirements for VFR operations.
The investigation also revealed that there was a
lack of crew briefing and checklist reading, which
could have potentially led to confusion between
the pilots over each other's intentions. Cockpit
conversations were dominated by the PIC, and
decisions made were immediately met by an
"agree statement" from the SIC, indicating a steep
cockpit transition gradient.
Following the accident, the country's directorate
general for civil aviation (DGCA) conducted a
special safety audit on Nusantara Buana Air. The
airline also undertook several safety actions
covering operations and maintenance.
The NTSC recommends that the DGCA should
ensure the training implementation of control flight
into terrain (CFIT) and approach and landing
accident reduction (ALAR), and to improve the
quality and quantity of operation inspectors "to
ensure the surveillance of the DGCA to the
operator."
Source: Flight Pro
ALL NIPPON AIRWAYS REMOVES ELTS ON
787S FOR CHECKS
All Nippon Airways (ANA) has taken the initiative
to remove the emergency locator transmitters
(ELTs) from its fleet of Boeing 787s for checks,
after a fire incident on board an Ethiopian Airlines
787 on 12 July.
from the fact that none of the passenger aircraft
that crashed happened to be large, and they were
carrying small passenger loads. Nevertheless,
survivability in modern hulls continues to be a
favourable factor. The Lion Air Boeing 737-800
that crashed into the sea short of the runway at
Denpasar in Indonesia caused injuries among its
seven crew and 101 passengers, but no fatalities.
Source: Flight Pro
The Japanese carrier started the process on 19
July, and expected the checks to take up to two
weeks to complete, says a spokeswoman.
"We're checking to see if the ELTs are working
correctly. This is done voluntarily and not a
recommendation from the authorities," she says,
adding that the inspections have not disrupted the
carrier's 787 operations.
In the week ended 19 July, both ANA and Japan
Airlines - the world's largest operators of the 787 conducted "visual inspections" on their 787s and
found no irregularities or safety threats. The
checks focused on the rear of the aircraft.
ANA's decision to check on the ELTs comes after
the UK Air Accidents Investigation Branch (AAIB)
identified the lithium-powered ELTs as the only
system capable of igniting in the area of the
Ethiopian 787 fire at London Heathrow airport.
The AAIB's initial findings, however, did not
pinpoint whether the battery was the source of the
fire or was simply damaged as a result.
The US Federal Aviation Administration,
meanwhile, is reviewing AAIB's recommendation
to disconnect all Honeywell Rescue406 ELTs until
the investigation establishes a cause. Honeywell
has said it supports the recommendation as a
"prudent" precaution.
Source: Flight Pro
SIX-MONTH SAFETY FIGURES MAINTAIN
GRADUAL IMPROVEMENT
Worldwide airline fatal accidents in the first six
months of 2013 maintained the all-time best figure
of nine, while the number of fatalities involved set
a new low of 58.
FAA: INSPECT 787 ELTS FOR PINCHED WIRES
AND MOISTURE
Boeing 787 operators have been advised to look
for "pinched wiring" and evidence of moisture
during their soon-to-be-mandated inspections of
the emergency locator transmitter (ELT) and
surrounding equipment.
The recommendation was made by the US
Federal Aviation Administration following initial
investigation of the 12 July Ethiopian Airlines
Dreamliner fire, which occurred in the rear cabin
ceiling area where the ELT is positioned.
Having reviewed the initial findings of the UK Air
Accidents Investigation Branch, the FAA says it is
"working with Boeing to develop instructions to
operators for inspection of the ELTs on 787
aircraft".
"These inspections would ask operators to inspect
for proper wire routing and any signs of wire
damage or pinching, as well as inspect the battery
compartment for unusual signs of heating or
moisture," it adds.
An airworthiness directive is to be issued "in the
coming days", adds the FAA, which notes:
"Federal Aviation Regulations do not require large
commercial aircraft in scheduled service to be
equipped with these devices."
Other aviation authorities will be informed of the
FAA's intentions: "As an active participant in the
AAIB's investigation, we continue to work closely
with the AAIB, along with Boeing and Honeywell
[the ELT manufacturer] as the investigation
continues."
Source: Flight Pro
Such a short period has limited statistical
significance in its own right - especially since
safety has become so good that the numbers are
tiny - but in comparison with the same period in
each year for the last decade, the trend indicates
that an established gradual improvement is being
maintained.
The very low fatalities figure this year so far will
probably prove to be a matter of chance. The first
six months of last year was more typical, with 338
casualties in the period. The low figure results
5|Page
AIRLINE SAFETY ENCOURAGING IN 2013'S
FIRST HALF
Worldwide airline fatal accidents in the first six
months of 2013 maintained the all-time best figure
of nine, while the number of fatalities involved has
set a new low at 58.
Such a short period has limited statistical
significance in its own right, especially since
safety has become so good that the numbers are
tiny, but in comparison with the same period in
each year for the last decade, the trend shows
that an established gradual improvement is being
maintained. Last year's total of nine fatal
accidents matched the decade low and compared
with 12 in the same period in 2011.
safety awareness campaign which includes an
instructional video. In a particularly chilling
statement at the campaign launch, the CAA said:
"Of particular concern is the threat of fires
breaking out in hidden areas of the aircraft, which
cabin crew are unable to access and bring under
control in-flight."
Accidents included in this survey cover all airline
operations, whether passenger or cargo,
scheduled or charter, on revenue service or
positioning flights. A complete non-fatal listing is
not attempted, as there are enormous numbers of
minor incidents, so it just includes accidents or
incidents that are significant in their own right or
illustrate a trend or phenomenon - like runway
excursion, the most common accident type.
The CAA statement continues: "The importance of
reducing fire risks was highlighted with the recent
significant fire on the Ethiopian Airlines Boeing
787 on the ground at London Heathrow [12 July
2013]. As the film points out, an in-flight fire that is
out of control will, on average, lead to flight crew
losing control of the aircraft within 15 minutes."
The vulnerability of aircraft to fire is on the CAA's
"Significant Seven" list of the greatest threats to
aviation safety.
The very low fatalities figure this year so far will
probably prove to be a matter of chance. The first
six months of last year was more typical, with 338
casualties in the period. The low figure results
from the fact that none of the passenger aircraft
that crashed happened to be large, and they were
carrying small passenger loads. Nevertheless,
crash survivability in modern hulls continues to be
a favourable factor. The Lion Air Boeing 737-800
that crashed into the sea short of the runway at
Denpasar in Indonesia saw injuries among its
seven crew and 101 passengers, but no fatalities
(see accident list). Another demonstration of
remarkable survivability took place in earl July just outside the period under study - when the tail
of an Asiana Boeing 777-200ER approaching San
Francisco airport hit the sea wall short of runway
28L. This caused separation of the entire
empennage, but 304 of the 307 people on board
the aircraft survived the subsequent crash and
fire.
Source: Flight Pro
HOW THE RISK OF FIRE IN AIRLINERS IS
INCREASING
Fire on board aircraft has caused fewer fatalities
in recent years than it once did, but the risk of firecaused incidents and accidents is increasing.
That is the conclusion of international experts
assembled by the Royal Aeronautical Society,
who recently published the first part of a study
called "Smoke, fire and fumes in transport aircraft"
(SAFITA).
Captain John Cox - president of US-based safety
consultancy Safe Operating Systems (SOS), and
one of the experts on the SAFITA team - says that
as aircraft technology and construction materials
change, so does the fire risk profile - and almost
certainly not for the better. Meanwhile, the US
Federal Aviation Administration and the UK Civil
Aviation Authority have just jointly launched a fire
6|Page
Cox observes that two of the principal reasons for
the change in the fire risk profile is the
proliferation of lithium batteries on aircraft - both
batteries installed in the aircraft and those carried
by crew and passengers in personal
electrical/electronic devices - and also the
increasing use of composite materials in aircraft
hulls. "Composites in the vicinity of lithium
batteries - how is this going to play out?" he asks.
In this question he is not only acknowledging the
kind of risk that the Ethiopian 787 fire
demonstrated, but also expressing concern about
the fact that the industry has little experience of
the behaviour of composite materials in the
presence of heat and fire. Aluminium, for all its
limitations, is a known quantity.
One of the reasons for the fewer fatalities in
recent years is that the fire-related accidents in
the last decade have mostly involved freighters.
Since 2011, two Boeing 747Fs - one operated by
South Korean carrier Asiana, one by US package
shipper UPS - have been brought down by fire
with the loss of the entire crew. In both cases the
fire was believed to have started in pallets of
lithium batteries carried as cargo.
In the UPS case, said the investigators in their
official report, the time between the fire warning
being triggered and the first failures in a
cascading loss of aircraft systems was 2min. The
flightdeck filled with smoke and captain left his
seat when the supply of oxygen to his mask
unaccountably failed. The co-pilot soon could not
see his instruments nor see out of the windscreen,
nor see even to change the radio frequency, so
was totally incapacitated. The report and its
conclusions are a nightmare to read.
There is no indication, according to the RAeS, that
passenger aircraft are safe from similar events
and, if a single event like the loss of Swissair
Flight 111 were to take place now, it would
reverse the interpretation of medium-term
statistics. Swissair 111 was a McDonnell Douglas
MD-11 that crashed into the sea near Halifax,
Canada in 1998 when a short-circuit in a
damaged wiring bundle generated a fierce fire in
the ceiling just aft of the cockpit. The spreading
fire caused a sequence of cascading system
faults, eventually wiping out the primary flight
instruments. Finally smoke blinded the pilots so
they could not fly.
Airbus's gross order forecast has been raised to
over 1,000 aircraft for the full year, with deliveries
of 600-610 jets.
Both the recent 747F losses have been attributed
to fires that began in cargoes of lithium-ion
batteries. The Ethiopian Airlines 787 fire at
Heathrow, according to initial examination by the
UK Air Accident Investigation Branch, involved a
lithium-ion-battery-powered emergency locator
transmitter, and an extensive area of the
composite fuselage crown just ahead of the fin
suffered heat damage. When fire crews attended,
halon extinguishant directed to that area from
within the cabin failed to bring the fire under
control, says the AAIB's initial factual report. But
eventually, water was effective in dissipating the
heat and stopping the fire's progress.
Airbus, the greatest contributor to EADS's
revenues, will remain as the brand for the
commercial aircraft division. EADS chief Tom
Enders says this recognises the "predominance"
of the commercial sector in the group.
Source: Flight Pro
EADS REBRANDS AND RESTRUCTURES
UNDER AIRBUS NAME
EADS has confirmed that it is to restructure under
the Airbus Group brand next year, into a company
with three divisions covering commercial, defence
and rotorcraft operations.
It disclosed the plan as Airbus posted first-half
earnings of nearly €1.1 billion ($1.4 billion), a 95%
increase on the previous year, on revenues of
over €18 billion.
Restructuring of EADS will begin in January 2014
and will be completed in the second half of the
year. But EADS says several approval
procedures, including consultation with personnel,
will need to be undertaken first.
Airbus Military - which builds the A400M transport
- as well as the Astrium and Cassidian units, will
be integrated into Airbus Defence & Space, based
in Munich. This is to respond to the "changing
market environment", particularly the "flat or even
shrinking" budgets in these sectors, says EADS.
The Eurocopter arm will be rebranded as Airbus
Helicopters but will otherwise remain unchanged.
"Rotorcraft technology is very particular and it's
necessary to maintain the strong synergies
between civil and military products," says EADS.
EADS posted a half-year increase of 6% in overall
revenues, to €26 billion, with net income of €759
million, up 31%.
Airbus recorded earnings, before one-off charges,
of €1.2 billion. The charges of €136 million
included €28 million relating to A380 wing-rib
bracket repairs and €108 million for pre-delivery
payment dollar mismatch and "balance sheet
revaluation: say the company.
Source: Flight Pro
LOSSES OVERVIEW
Despite some recent losses the aviation
experience remains good when compared with the
five year average. When looking at the
unprecedented performance of the past two years
things look to have deteriorated a little however.
The 2013 experience should perhaps therefore be
viewed as less good rather than bad!
There continue to be a low level of fatalities with
recent experience perhaps demonstrating just how
safe the industry and modern day aircraft actually
are.
7|Page
Airline insurance therefore remains a catastrophe
business without catastrophes and as a result
2013 could still be one of the best years ever in
terms of losses. The hull loss total currently stands
at US$539 million with liabilities of US$225 million
while a pro rata valuation of attritionals of US$300
million generates an overall total of US$1,064
million.
There were 12 losses to date which have loss
reserves over US$10 million, as shown on the
following page.
2013 HULL & LIABILITY LOSSES WITH A RESERVE OVER US$10 MILLION
Date of
Loss
February 3
Operator
Aircraft
Type
Location of Loss
Fatalities
Asiana Airlines
B767
Incheon Airport, South Korea
0
April 13
Lion Air
B737
Bali, Indonesia
0
April 29
National Air Cargo
B747
Bagram Airport, Afghanistan
8
May 16
Shandong Airlines
B737
Shandong, China
0
May 24
British Airways
A319
London Heathrow, UK
0
May 24
Air Via
A320
Varna International Airport, Bulgaria
0
June 8
Wizz Air
A320
Rome Fiumicino Airport, Italy
0
June 10
Merpati Nusantara
MA60
Kawthaung Airport, Myanmar
0
July 6
Asiana Airlines
B777
San Francisco Airport, USA
3
July 12
Ethiopian Airlines
B787
London Heathrow, UK
0
July 22
Southwest Airlines
B737
La Guardia Airport, New York, USA
0
Aug 14
UPS
A300
Birmingham Airport, Alabama, USA
2
Millions
CUMULATIVE MONTHLY INCURRED RESERVE DEVELOPMENT (US$M)
$3,000
2009
2010
2011
2012
2013
$2,500
$2,140m
$2,000
4 Year Avge $1,675m
$1,500
$1,356m
$1,064m
$1,000
$909m
$696m
$500
$0
Jan - Aug
Jan - Aug
Significant losses that have occurred within the
past couple of months are outlined below.
On August 14, a UPS A300, registration N155UP,
crashed on approach to Birmingham Airport,
Alabama, USA. Both crew members on board were
killed. The hull reserve for this loss is US$68.8
million.
On August 10, a Jetstar Airways A320, registration
VH-VGR, suffered damage after a collision with a
Virgin Australia B737 registration VH-YID at
Melbourne International Airport, Australia. During
pushback the Virgin Australia B737's left wingtip
collided with the tail end of the Jetstar Airways
A320 causing significant damage to the A320. The
8|Page
Jan - Aug
Jan - Aug
Jan - Aug
Virgin Australia B737 only received minor damage.
The hull reserve for this loss has yet to be
established.
On July 22, a Southwest Airlines B737, registration
N753SW, suffered a nose undercarriage collapse
on landing at La Guardia Airport, New York, USA.
It is understood that the passengers and crew
evacuated the aircraft with three minor injuries
reported. The hull reserve for this loss is US$14.2
million.
On July 12, an Ethiopian Airlines B787-800 aircraft,
registration ET-AOP, suffered a minor fire while
parked on stand 592 at London Heathrow Airport,
United Kingdom. Photographic evidence seems to
show a small area of fire damage to crown skin on
the left side just forward of the vertical stabilizer.
The aircraft was day parked on a remote stand
with no passengers or crew on board and nobody
was injured in the event. We understand the hull
reserve is approximately US$44 million but may
change in due course.
On July 6, an Asiana Airlines Boeing 777,
registration HL7742, crashed on landing at San
Francisco Airport, USA. The aircraft undershot
Runway 28L on landing, lost its tail, undercarriage
and engines and caught fire. It is now understood
that of the 291 passengers and 16 crew there were
three fatalities. Many of the passengers had
serious injuries. The hull reserve for this loss is
US$105 million.
On June 30, an Air Bridge Cargo B747, registration
VQ-BJB, suffered damage after the aircraft overran
the runway while landing at Sheremetyevo
International Airport, Moscow, Russia. We are
waiting for confirmation of this reserve.
On June 14, a Delta Airlines MD-88, registration
N995DL, sustained damage when its left wing
knocked down a pole while taxiing for departure at
Nashville International Airport, USA. We are
waiting for confirmation of this reserve.
FORTHCOMING RENEWALS
The final quarter and in reality six weeks of the
year is when the majority of airline renewals come
to market and the largest premium volume is
generated. With over 50% of the renewals but
more significantly in excess of 65% of the premium
renewing at this time it is pivotal for the fortunes of
the market. The current trend is expected to
Renewal Distribution % Share
continue as the excess capacity that exists in the
market continues to generate competition.
Exposures are anticipated to continue to increase
at single digit levels and with increased exposure
not correlating with increased claims these are
unlikely to be charged for.
Premium Distribution % Share
Q1
3%
Q1
8%
December
30%
Q2
19%
December
42%
November
16%
October
5%
Q3
16%
October
7%
Q3
22%
The largest programmes come to market with great
track records and future plans. There are 37
renewals in the Willis 50 during the final quarter
and 28 of these take place in the final six weeks of
the year.
It is also a time when many of the largest group
programmes come to market. One of these is the
largest programme in the market CAAC. In 2012
this programme experienced growth of such a level
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Q2
13%
November
19%
that if the growth had been placed independently it
would have been one of the largest 20
programmes in the market.
The final quarter of the year is therefore likely to
bring buyers much of the same. Premiums will
reduce, exposures will grow and hopefully losses
will remain low. Without a change in one of the
major market drivers it is also likely that 2014 will
look and feel a lot like 2013.
OCTOBER RENEWALS
Airline/Group Name
NACIL - Air India & Indian Airlines
Allegiant Air
Fuji Dream Airlines
Gol Transportes Aereos
TAME
Tatarstan Air
Skywest
China Airlines / Mandarin Air Lines
Transasia Airways
Iraqi Airways
Go Airlines
Fastjet
Cebu Pacific Air
Renewal Date
01-Oct-13
01-Oct-13
01-Oct-13
10-Oct-13
11-Oct-13
13-Oct-13
15-Oct-13
15-Oct-13
15-Oct-13
21-Oct-13
21-Oct-13
22-Oct-13
26-Oct-13
Expiring AFV US$
9,571,958,351
321,751,564
170,171,150
3,949,572,212
312,000,000
104,998,000
9,277,071,847
5,142,437,968
468,341,918
668,393,834
537,088,731
163,780,824
1,456,173,262
CONTACT DETAILS
Steve Doyle
Chief Commercial Officer
Tel: +44 20 3124 7208
Email: [email protected]
Kelly Crudgington
Executive Director
Tel: +44 20 3124 7377
Email: [email protected]
Jason Mota
Information Analyst
Tel: +44 20 3123 6945
Email: [email protected]
[email protected]
This is the Willis Airline Insurance Insight, which is our vehicle to keep our clients and others informed of developments in the airline
insurance market. We welcome any comments or suggestions you may have to improve this publication. All data and analysis within this
newsletter includes all known information at the time of production and is based on the net lead terms of airline insurance programmes
renewing with fleet values in excess of US$100 million. The analysis does not take into account any coverage changes and is not
weighted in relation to the size of the programme’s exposure or volume of premium paid. Loss information includes western built
equipment and our attritional loss threshold is below US$1 million. These figures are based on a like for like basis and exclude those risks
that incepted in 2012 and are no longer in operation and those risks that have commenced operations in 2013 as these will distort the
percentage change figure.
This newsletter offers a general overview of its subject matter. It does not necessarily address every aspect of its subject or every product
available in the market. It is not intended to be, and should not be, used to replace specific advice relating to individual situations and we
do not offer, and this should not be seen as, legal, accounting or tax advice. If you intend to take any action or make any decision on the
basis of the content of this publication you should first seek specific advice from an appropriate professional. Some of the information in
this publication may be compiled from third party sources we consider to be reliable, however we do not guarantee and are not
responsible for the accuracy of such. The views expressed are not necessarily those of the Willis Group.
Copyright Willis Limited 2013. All rights reserved.
Willis Limited, Registered number: 181116 England and Wales.
Registered address: 51 Lime Street, London, EC3M 7DQ. Tel +44 (0)20 3124 6000. www.willis.com
A Lloyd’s Broker, Authorised and regulated by the Financial Conduct Authority for its general insurance mediation activities only.
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