If representatives of the aviation insurance industry were all aboard one flight, the pilot would now be announcing that there’s turbulence ahead. This market is in a state of change and not all of it is good, which in turn has implications for brokers seeking coverage for their winged insureds, according to a new leader in the Canadian aviation space.
“The last decade and a half, which was mostly characterized by decreasing aviation insurance costs, has ceased and now we are seeing rates rise,” said Michael McEwen (pictured), HDI Global Specialty SE’s newly-appointed head of aviation in Canada. “Poor underwriting results due to low rates, higher repair costs and an increased frequency of attritional losses have markets reconsidering how much exposure they want to take on and re-evaluating what is acceptable rating. In some cases, we have even seen markets that underwrite aviation risks, including in Canada, exit the class altogether.”
As a result, brokers in this space are seeing more challenges in getting placements complete and many large or high limit risks are being quota shared with more markets than in the past, added McEwen.
There are a few key trends impacting the industry that have changed its flight path. While technological advancements in aircraft design have made aircrafts safer and more fuel efficient, they’ve also made them more expensive to repair. At the same time, there are shortages of pilot and aircraft maintenance professionals, and changes to flight and duty time limits in Canada (how many consecutive hours a pilot can work/fly) have increased the number of pilots needed.
“As a result, airlines are hiring experienced pilots from other operators, and in turn those smaller companies are having to bring in a higher than usual number of new pilots to train and fill those positions. This has reduced overall pilot experience levels,” explained McEwen. “Furthermore, there has been a lack of new talent entering the aircraft maintenance profession. As the current generation is retiring, there are far fewer to take their place and transfer that technical knowledge on to. Subsequently, we are seeing a decrease in experienced professionals in this space.”
As he comes into his new role, McEwen’s top priority for the Canadian HDI Global Specialty aviation team will be to provide to Canadian clients the same level of dependable and trustworthy support that HDI’s team in Europe has already established.
“We are focused on building a healthy book of business that has a diverse spread of aviation risks so we can become a fixture of the Canadian marketplace for the next 50 years and beyond,” said McEwen, who came onboard from Toronto-based Canadian Aviation Insurance Managers. He added that another important takeaway will be building long-term partnerships with clients. “Insurers and clients both benefit from having a long-term outlook to their insurance placements as neither party is served by short-term relationships. We will look to form lasting partnerships with clients that will hopefully see us act as their aviation insurer for decades to come.”
As he leads his team through a tough marketplace, where several insurers have stopped writing aviation insurance altogether, McEwen sees an opportunity to provide stable capacity to a market in desperate need of it.
“In a class of business which has seen contraction and insurers exiting, we want to demonstrate to brokers and their clients that we are the right fit for them and have a plan to be a long-term partner in the Canadian aviation insurance space,” he told Insurance Business.
