Market Update.

Beginning in 2006, the aviation insurance marketplace started experiencing numerous company and personnel changes resulting in changes to market competition and rates.

At this time last year we saw the addition of Starr Aviation and Allianz Aviation Managers as new forces in the General Aviation (GA) insurance market. As predicted, these markets brought new capacity and competition resulting in reduced rates to customers within specific target segments. These new carriers began targeting turbine aircraft operators, large commercial operations, products manufacturers, large fixed base operators with aircraft fleets, agricultural aviation, rotor-wing operators and other large aviation businesses. As these two markets grow in staff and operational capabilities we can expect to see new lines of business offered, including pleasure and business policies for piston owners.

In the months following the entry of these two companies there have been a number of announcements regarding additional carriers entering the marketplace. The Travelers Companies, Inc. is now writing aviation insurance policies through its recently formed Travelers Aviation. Travelers is currently targeting customers similar to those of Starr Aviation and Allianz, but with certain variances.

Britt Paulk Aviation Underwriters has also entered the marketplace as a managing general agent for the AXA insurance group. They are interested in writing pleasure and business aircraft, commercial aircraft, industrial aid/corporate use aircraft, flight schools, FBOs, airports and aircraft upgrades/transitions with hull values up to $3.5 million and liability limits up to $2 million. This is the first of the newer aviation insurance markets to start writing piston pleasure and business policies.

Most recently, Inter-Aero, the managing general agent for Arch Insurance Company, has increased its capabilities as an aviation insurance market. Inter-Aero had already been writing large commercial and rotorwing operations on a quota share (sharing a limited percentage of the risk) basis, but now they’ve started writing GA policies on a 100 percent basis. Similar to several of the other new markets, they are targeting business turbines, repairs and services and airport risks.

Looking Ahead.

There are now more insurance carriers in the aviation insurance marketplace than there have been in more than 15 years. This amount of capacity and competition will continue to prove advantageous for the aviation insurance customer for the near future. As these carriers expand their lines of business and risk portfolios more segments of the industry will see increased competition and rate reductions.

While customers always welcome rate reductions, we must remember that the insurance marketplace is cyclical and at some point in the future the fulcrum will shift. Rates will eventually level off or increase. Factors contributing to this shift generally include insurance companies departing the marketplace causing a decrease in capacity and competition, heavy claims causing underwriting losses, poor investment performance reducing the investment income which offsets underwriting losses, regulatory issues causing a number of issues and other outside influences changing the outlook for the future.

Ultimately, aviation insurance customers should enjoy the market while it is soft, but they should also prepare for the inevitable changing cycle. Review your liability risks annually and choose an insurance partner that takes time to fully understand your needs. PIM has access to all these new markets and carefully evaluates them for its clients.

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