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Aviation Reinsurance Rates Rise by as Much as 250% in January Renewals: Willis Re

2021-01-04 09:16:24
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Aviation reinsurance rates rose by up to 250% on key January 1 renewal date, broker Willis Re said in a report on Monday, as the market is still reeling from impact of the Boeing 737 MAX crash two years ago .

The 737 MAX resumed commercial flights in the United States last week, following a 20-month safety ban following two fatalities in a five-month period of 346 people.

Insurers and reinsurers are facing claims of the hull and product liability crashes that could exceed $ 2 billion, a large amount in a relatively small insurance industry, Willis Re International chairman James Vickers told Reuters.

Aviation insurers also suffer from lower premiums due to global lockdowns and travel bans as insurance contracts are often negotiated based on the amount of time planes spend in the air.

Reinsurers, who share the burden of high risks with insurers in exchange for a share of the premium, are also seeing interest rate hikes in other

Aviation reinsurance rates jumped to 250% on key January 1 renewal date, broker Willis Re said in a report on Monday, as the market is still reeling from the impact of the Boeing 737 MAX crash two years ago .

The 737 MAX resumed commercial flights in the United States last week, following a 20-month safety ban following two fatalities in a five-month period of 346 people.

Insurers and reinsurers are facing claims of the hull and product liability crashes that could exceed $ 2 billion, a large amount in a relatively small insurance industry, Willis Re International chairman James Vickers told Reuters.

Aviation insurers also suffer from lower premiums due to global lockdowns and travel bans as insurance contracts are often negotiated based on the amount of time planes spend in the air.

Reinsurers, who share the burden of major risks with insurers in exchange for part of the premium, are also seeing rate increases in other sectors after years of declines.

The report shows that property and accident reinsurance premiums are up 25-30% for the most risky industries.

Analysts at Jefferies said the report showed that a hard reinsurance market – in which premium rates are rising – was underway, with an emphasis on real estate gains in the US, global accident and specialty lines like trade credit and political risk, as well in aviation.

But rates aren't going up as much as reinsurers had hoped, despite the coronavirus pandemic.

Insurers themselves have benefited from higher rates and lower claims in areas such as motor vehicles this year, giving them a strong hand in contract negotiations, Vickers said.

Reinsurers felt quite optimistic and felt “this is our time,” Vickers said, adding that they had nevertheless “at least achieved rate stability and some rate hikes”.

Vickers said the biggest disagreements between insurers and reinsurers were about coverage for cyber-attacks and communicable diseases such as COVID-19. Reinsurers largely exclude these risks in policy formulations, he said.

(Reporting by Carolyn Cohn; edited by Jan Harvey, Kirsten Donovan)

Photo: Boeing 737 MAX planes are parked at Boeing's property near Boeing Field on August 13, 2019 in Seattle, Washington. Photo credit: David Ryder / Getty Images.

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