NationAir Aviation Insurance
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Letter from the President: Jeffrey Bauer

Still a Buyers' Market: General Aviation Market Review and 2015 Outlook
With 2014 behind us and the insurance renewal season winding down, NationAir believes it is apparent that aviation insurance rates overall will remain low, with few increases and some decreases expected in 2015. Coupled with continued indicators for growth in the general aviation market, this gives an added boost to aviation businesses looking to expand their operations.

A crowded aviation insurance field continues to drive rates. Despite an historic high of 20 aviation insurers operating in the United States, not a single carrier exited the marketplace this year. This indicates that aviation insurers are surviving with smaller market share than in the past. All this adds up to good news for buyers of aviation insurance, who once again will enjoy many options and frequently see multiple insurers vying for their business.

After Malaysian Airlines’ and Air Asia's high-profile aircraft losses in 2014, many industry pros speculated this would force aviation insurance rates upward. However, we believe the effect on general aviation insurance rates and availability will be minor because the incidents occurred outside the United States, involved an international airline, and applied mostly to war risk insurance.

Commercial Aviation
Insurance for commercial general aviation remains very competitive. In fact, some insurers that only wrote policies in limited areas of commercial aviation are broadening their product offerings across more segments of commercial aviation.

Within this category, flight schools are likely to receive flat renewals, while charter or ground operations may still see single-digit rate decreases. Clients with recent claims are less likely to see their rates drop, yet we have not noted steep rate increases in these situations unless the loss was quite large. MROs without losses are receiving flat renewals, possibly because their risk profiles show less potential to change compared to charter operators that upgrade equipment. Overall, the higher incidence of losses in commercial aviation, compared to the corporate sector, has not seemed to affect insurance rates.

Corporate Aviation
Despite one large corporate loss this spring, the overall loss history of corporate aviation remains very good and has maintained a multiyear downward pressure on rates for corporate operators. Even corporate operations that upgrade equipment may not receive overall premium increases, because lower rates per hundred on a higher-value aircraft can offset the higher insured value. This segment remains the most highly favored by aviation insurers.

Personal use aircraft
Rates for smaller, personal use aircraft, termed “pleasure and business” by the insurance industry, have also decreased overall in the past year.  However, in this market segment, rates are more driven by individual aircraft type and can be influenced by favorable or unfavorable loss history for a given aircraft type. Rates could decrease for one aircraft model, while a different model’s rates increase.

In good news for insurance buyers, higher liability limits - always an issue in this segment - have become more readily available. For personal-use turbine aircraft, the effects of several high-profile losses in the fourth quarter, including a fatal accident in Maryland, may affect the availability of higher limits in the segment in 2015.

In agricultural aviation, with fewer insurers active in this segment, renewals have ranged from flat to single-digit increases, based upon losses. Because agricultural aviation consistently posts a higher rate of claims than other areas of general aviation, rates do not decline significantly. High aircraft values in ag aviation make hull claims expensive for the insurers to adjust, which also keeps rates from dropping despite other market forces.

Public Entities
Insurance for the aviation operations of public entities, on the other hand, remains very competitive, with most government bodies receiving rate reductions on renewals. This segment benefits from a generally favorable loss record, and enjoys reliable funding and commitment to provide pilots with strong training programs. The number of insurers in the market remained the same in 2014, with no new participants.

In all market segments, overcapacity will continue to be the main story in aviation insurance in 2015. Unless a significant insurer departs or dramatic losses occur, NationAir believes there will be no reason for rates to increase in 2015, leaving insurers to compete for the same business in a variety of other ways. Some insurers have lowered rates to increase market share, while others have increased their service offerings via emergency response planning, safety management systems and loss control as a way to build their brand and increase customer loyalty. Time will tell if these additional services will be enough to overcome lower rates that may be offered by competing insurance carriers.

Do you have questions about the insurance market as it applies to your business? Contact your individual broker for more information.





Jeffrey Bauer, president of NationAir, discusses the company's leadership in the industry.

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