Aviation insurance a winner, says Willis

In its Willis Aerospace Aviation Products Market Review 2012, London based insurance broker Willis states that the airline and aviation insurance markets report a profit for the first time in five years as airline losses and passenger fatalities dropped to all-time lows.
The Review reveals total airline insurance premium in 2011 was $1.9bn, against claims of $1.1bn, giving rise to the first profitable year for the airline insurance sector in five years. Total reported 2011 premiums for aviation manufacturing insurance were $657.9m.
An analysis of insurance renewals across all aerospace sectors found a rate reduction of 1.8% compared with 2010.
This follows one of the safest years for the aviation industry in recent times. There were 30 total losses of western built aircraft in airline service in 2011, down from 46 in 2010 and the lowest number recorded. Passenger numbers increased 5% from 2010, yet overall passenger fatalities continued a steady ten year decline. There were 184 passenger fatalities last year, compared with 648 in 2010. The five-year average fatality rate per million passengers decreased to below 0.2.
The improvement in the industry’s safety record is attributed to the use of advanced safety avionics, plus improved pilot training standards.
“The aviation industry is returning to good health,” says Mark Wilford, chairman of Willis Aerospace. “New technologies continue to deliver improved long-term safety records and fleet/passenger numbers are growing. However, buyers recently confirmed to us that aviation insurers should be reminded it is the aerospace/manufacturers sector that, by and large, has historically subsidized the overall aviation-insurance market through more difficult times across other sectors,” says Wilford.
This year’s Review questions whether insurers are giving buyers of aviation products policies adequate rate reductions given the growing use of Self Insured Retentions, which have been generating cleaner claims records for aviation manufacturers’ policies and therefore better risk profiles for insurers.