The Aviation Insurance Marketplace and COVID-19: Trends for 2022 and Beyond
When you look at the aviation insurance marketplace, there’s a lot happening. In a report released by Aerospace Central Europe in December 2021, the group analyzed the impact of the pandemic, industry interruptions, and risks in aviation that you can expect to face going forward. It’s still very relevant for what we see unfolding in the aviation insurance marketplace well into 2022.
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Covid-19’s Impact on the Aviation Insurance Marketplace
During the pandemic, the aviation industry took a big hit. There were massive layoffs; canceled flights; planes grounded. Due to the major business interruption, planes could get credit from their premiums for the loss of profit. If a plane was laid up and not being used, such as airlines not flying them, they could get credits from premiums from their insurance carriers. All of these costs ate into premium that was used to make the aviation insurance marketplace sustainable.
Additionally, claims have become more expensive to adjust. Composite parts and innovative, new technologies are more expensive to repair and replace. This has resulted in a type of inflationary environment in aviation claims. Combine this with the supply chain issues caused by the pandemic and we have created the perfect storm for ‘expensive’ claims.
What’s Next for the Aviation Insurance Marketplace?
Long story short, aviation underwriters have been very alert as a result. It’s still a hard market—more cautious than it was 4, 5 years ago at the height of the soft market when premiums were eroding year after year for decades. With the pandemic slowly waning, the aviation industry has started to improve. People are flying again. Planes are being built. Planes are being used. Travel is healthy. The insurance marketplace is following suit, however cautiously.
We expect that market to remain hard as premiums return to a sustainable level. It will likely take several years of a return to underwriting, increased premium, caps on limits and ancillary coverages like layups, etc. until we have a premium surplus. Ultimately, the pandemic has essentially been a driving factor for the prolonged hardened market that began in 2018.
As the aviation insurance marketplace continues to evolve, there are many issues and trends that will contribute to customizing aviation insurance. It’s important to work closely with expert brokers to understand what insurance coverage is right for you.
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