Kevin O'Toole/LONDON
ALTHOUGH AIRLINER losses, were at their lowest for nearly a decade in 1995, aviation insurers have been keen to dampen expectations, that their rates will begin to tumble.
Insurers fear that the accident decline may be taken by the market as a signal to drop insurance rates, which the underwriting community has spent the past five years trying to raise.
They point out that the 1995 loss looks little better than the running average, but that the improvement has been exaggerated because it follows 1994, which was the worst year in aviation history.
The exact extent of losses in 1995 has yet to be calculated, but estimates suggest that the total may be less than $1 billion. Losses of Western-built jet aircraft are being put at $434 million, with around $100 million for turboprops. Passenger liabilities are expected to come in at around another $450 million. If the estimates hold good, that would leave 1995 showing little more than, half the $1.9 billion losses experienced in 1994.
"The fact that 1995 was an improvement on the worst year ever in 1994, does not make it an unusually good year for underwriters. A determined effort must be made to avoid rating levels coming under pressure," warns Barry Wilkes, chairman of the Aviation Insurance Offices' Association, which represents major London insurance firms.
In part, the concern stems back to the experience in the mid-1980s, when record losses in 1985 were followed by an exceptionally good year in 1986. Insurance rates, which had at first risen sharply, went into free-fall, from which they are only now recovering.
"We went below break-even in 1991 and, since then, we've been attempting to claw our way back, but we haven't yet achieved that," says Wilkes.
Privately, insurers admit that fears of another collapse are probably exaggerated. Rates rises over the past couple of years appear to have been relatively modest and, although there is still no shortage of underwriting capacity, this time the market is not awash with new entrants as it was in the 1980s.
Airlines penalised during 1994 have already benefited during the latest round of year-end policy renewals, says Wilkes, but he gives notice that insurers are intent on holding the line on rates over the coming 12 months.
Source: Flight International
