Insurance Day recently published an article, highlighting the effect of attritional losses on the aviation market, featuring HDI Global Specialty SE’s Head of Aviation and Space, Martin Jackson.
The impact of overall claims on the insurance market is that a number of underwriters have abandoned the segment, such as Brit, Hiscox, WR Berkley and Aspen.
The article explored the recent shift within the aviation industry, which has seen an increase of attritional losses versus a decrease in catastrophic incidents.
These smaller incidents have grown as a result of handling operations, ground manoeuvres and engine foreign object damage. Martin stated: “Attritional losses have accounted for more than 40% of losses in the past decade.”
In addition, there has been an increased use of composite materials. Although they improve safety, claims can be more costly if they suffer damage.
“Composite material costs are generally two to three times the cost of older parts and that has had a significant impact on claims, pricing and profitability.” Martin added. The increase in attritional losses and costlier claims has put a strain on the seemingly low Aircraft Hull deductible of $1m. This was established back in the 1980s and is clearly behind the times.
Martin commented: “There is certainly plenty of noise around deductible levels, with many in the market lobbying for an increase. The impasse we face currently regarding raising deductibles underlines the fact we are in a firming but not an entirely hard market.”
You can read the full Insurance Day article with a subscription here.
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