RUSSIAN AVIATION INSURANCE CONFERENCE 9 December 2009
AIRLINE RATE DYNAMICS IN THE INTERNATIONAL
MARKET 2002 – 2009
2009 Airline Insurance Market ReviewPrivate and Confidential November 2009 Page 2
2009 TO DATE
2009 Airline Insurance Market ReviewPrivate and Confidential November 2009 Page 3
Hull & Liability General Trends – 2009 Market
Losses currently totals US$2,240m – the highest on record*
Premium currently totals US$1,165m with large volume of premium still to renew
This will result in insurers making a loss in 2009.
Insurers expenses estimated to be in the region of US$300m – Includes reinsurance and other operating expenses
Third straight loss making year
Insurers committed to continue increasing premium levels in 2009 and 2010
* Excluding September 11th, 2001 losses.
Hull & Liability 2009 Net % Premium Movements
+17%
Airline Insurance Market ReviewPrivate and Confidential December 2009
Hull & Liability 2009 Hull Rate % Movements
+15%
Airline Insurance Market ReviewPrivate and Confidential December 2009
Hull & Liability 2009 Net Liability Rate per Passenger % Movements
+18%
Airline Insurance Market ReviewPrivate and Confidential December 2009
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
0%
20%
40%
60%
80%
100%
120%
140%Net Premium* Claims** Loss Ratio
Net Premium* $3,500 $3,060 $2,700 $2,320 $1,900 $1,800 $1,840 $1,165 Claims** $1,313 $924 $994 $1,157 $1,333 $1,956 $1,419 $2,240 Loss Ratio 35.0% 30.8% 36.8% 49.9% 70.2% 108.7% 77.1%Est Att Losses $350 $375 $375 $400 $400 $425 $425 $413
02 03 04 05 06 07 08 09 to date
*Premium includes all known airlines and an estimate for untracked airlines, and is based on Net London Lead Terms; it is subject to change as more information becomes available
**Claims include the estimated figure for attritional losses
7 Year Totals (2002-2008)Premium: US$17,120mClaims (inc attritional): US$9,096mProfit to the market: US$8,024mLoss Ratio: 53%
World Wide Airline Hull & Liability Premium and Claims on a Calendar Year Basis 2002 – 2009 (Net Leaders Terms US$M)
Airline Insurance Market ReviewPrivate and Confidential December 2009
Page 8
1615
9
15
1817
18
16
0
100
200
300
400
500
600
700
2002
2003
2004
2005
2006
2007
2008
2009
(to
date
)
Mill
ions
0
2
4
6
8
10
12
14
16
18
20
Hull Reserves US$ No. of Losses
No o
f Los
ses
Hull R
eser
ves
US$
2002 – 2009 Airline Hull Losses - In Excess Of US$10m (Excluding Hull War)
Airline Insurance Market ReviewPrivate and Confidential December 2009
Page 9
5
32
4 45
23
0
100
200
300
400
500
600
700
800
2002
2003
2004
2005
2006
2007
2008
2009
(to
date
)
Mill
ions
0
2
4
6
8
10
12
14
16
18
20
Liabilty Reserves US$ No. of Losses
No o
f Los
ses
Liab
ility
Rese
rves
US$
2002 – 2009 Airline Losses with more than 50 Fatalities (Excluding War Losses)
Airline Insurance Market ReviewPrivate and Confidential December 2009
Hull & Liability 2002 - 2009 Net % Premium Movements
Airline Insurance Market ReviewPrivate and Confidential December 2009
Hull & Liability 2002 - 2008 AFV
Airline Insurance Market ReviewPrivate and Confidential December 2009
Hull & Liability 2002 - 2008 Passenger Numbers
Pas
seng
ers
Airline Insurance Market ReviewPrivate and Confidential December 2009
CONCLUSION
Since 2002
• Fleet Values up 27.75%
• Passenger numbers up 45.6%
• Hull losses stable
• LiabiIity awards erratic, dependant upon Nationalities involved, where cases brought
• 2008 Premium only 52% of 2002 level
• Average yearly loss since 2002 = USD 1.4B plus attritionals of USD450M ? Plus R/I costs USD300M ?
• What level of premium do the market need to be reasonably profitable ?
2009 Airline Insurance Market ReviewPrivate and Confidential November 2009 Page 14
Willis LimitedWillis Limited, Registered number: 181116 England and WalesRegistered address: 51 Lime Street, London, EC3M 7DQ
Lloyd's broker authorised and regulated by the Financial Services Authority. This review is intended to inform our clients and others of issues and developments within the aviation insurance markets. Whilst every effort is made to ensure the accuracy of the information contained herein, Willis Limited accept no responsibility for any errors or omissions in the information or its consequences.
Selection Criteria used
Premium/Index percentage change derived from Airlines renewing with Average Fleet Values of US$100 million and greater. Comparisons made from annual renewal figures year-on-year.
Liability rate is calculated as premium per passenger carried. However the basis of liability rating for Airlines varies and can be based solely or on a combination of passengers carried, departures, RPK’s, passenger seats or per aircraft.
It should be noted that due to the relatively small sample of renewals in some months, that the comparisons with previous years can be distorted by the renewal of a small number of major risks and should be treated with caution.
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