Plane Talking -  December 2011

Executive Summary

Gearing up for 2012

“Despite some very impressive firework celebrations, marking the close of 2011 and welcoming 2012, our markets closed the year with far less spectacle. Notwithstanding, the usual rash of frantic activity compressed into the closing days, all renewals appear to have been concluded and generally in line with plans.

Market capacity continues to hold firm, however we must note the differing appetites between the various markets, seemingly driven more by “tweaks” to portfolio mix rather than wholesale changes.

We witnessed a continuation of the narrowing between the leader’s and following market prices, heralding an increasing challenge to complete placement at the agreed / acceptable terms.

2011 ended up an undeniably good year for losses, coming in significantly below the average of recent years, and this is also before making any allowance for inflation / increased exposures. As a consequence, it appears likely that without external events forcing the market’s hand, we are unlikely to witness any significant changed attitude to rates any time soon.

At the next renewal, each risk will undoubtedly benefit (or suffer) from its own loss experience. Whilst this echoes equity we continue to move away from one of the fundamental principles of insurance, the losses of the few are paid for by the many.

Premium in 2011 ended up at a level very similar to 2010, and whilst there were minor differences in relative contributions from Hull and Liability, overall these were largely irrelevant.

Exposures showed a marked increase over 2010, with Average Fleet Values up by 8% on average and Passengers even more at 11%. These growth rates appear in excess of Industry opinions, particularly in respect of mature markets of North America and Europe, the latter also likely to suffer from the effects of the Euro zone uncertainties.

Despite the continuing groans from our market for increased rates, overall underwriting results for 2011 should appear OK in most cases, and actually very good for some. Consequently there is nothing really visible on the (near term) horizon that is likely to act as the “tour de force” for change.

Perhaps we should not be surprised that the market’s appetite to innovate appears suppressed; but we echo John Blair’s comments in this edition’s Lead Lines, in that we would very much like to see some more creativity within the market for everyone’s benefit.”

 

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