The aviation insurance market has seen continued pressure on rates as Gallagher Re, a global reinsurance broker, reports on key developments following the 1 January renewal season. Ample reinsurance capacity, initially present at the start of the year, led to strong competition among reinsurers, giving buyers more flexibility and favorable terms.
Non-proportional reinsurance capacity was notably abundant, which allowed buyers to apply more pressure on terms, with some opting for mixed subscription and verticalized pricing strategies. Pricing for excess of loss policies saw slight reductions due to increased supply, though overall, reinsurers maintained a disciplined approach to underwriting.
In quota share placements, capacity levels remained stable, but reinsurers remained vigilant, particularly regarding portfolio composition, back-year loss deterioration, and commission rates.
Concerns in the market remain, particularly surrounding the trapped aircraft in Russia. The ongoing uncertainty has left insurers facing significant claims, although the exact financial impact remains undetermined.
In the direct insurance market, strong capacity and the influx of new players contributed to rate reductions, particularly for airline operators. Many experienced double-digit rate cuts, driven in part by new entrants seeking to secure market share, leading to a phenomenon known as vertical discounting.
The loss of Jeju Airlines on 29 December 2024, is expected to further influence underwriting strategies for the coming year, with calls intensifying for a revision of airline insurance pricing. While the exact scale of the claim is still pending, it is anticipated to exacerbate the existing underwriting deficit in the airline sector.
General aviation faced similar pricing pressures, with insurers diversifying their portfolios to manage risk. However, pricing adjustments in the products manufacturing segment were less pronounced than in the airline and general aviation sectors, despite continued overcapacity.
Markets for aviation hull war and third-party liability also experienced notable pressure in the final quarter of 2024, with rate reductions of approximately 10%. Increased competition, driven by the entrance of all-risk markets and expanded line slips, added to the strain on incumbents.
Despite these market pressures, reinsurers have remained disciplined, with most renewals seeing modest price reductions. Retention levels and vertical limits have remained steady, signaling that this pricing environment may continue into 2025 unless significant developments arise.
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