Aviation rates are flying high


Rates are continuing to rise, including a strong upturn in aviation, according to our monthly survey.

This month, over 60% of you said that you are seeing reinsurance pricing rising while 31% have seen rates staying the same. Only 7% of you say that the market is softening - compared to 16% last month - indicating that prices are now well and truly on the rise for most lines at renewals.

However, several respondents said that there is further to go before underwriters achieve realistic rates: "We have seen general increases but not by as much as we would like," noted one respondent.

On rising rates, with the well documented Air France crash and Yemenia Air disaster drawing Reinsurance's eyes towards aviation, we asked if you reckon the disaster will lead to a rise in rates: 24% of you reckoned on a rise of 20% or more, while 32% believed we will see increases of around 10%; a further 24% believed that rates will remain the same. Only 2% of respondents said rates will decrease, with none believing that rates will decrease by more than 5%.

One respondent told us: "The various Airbus problems and losses, including the most recent Yemenia Air disaster, have caused underwriters to rethink exposure." Another respondent noted that rates have already started increasing by between 10 to 15%.

Asking readers to gaze into their crystal balls, we asked what would happen with Max Capital having pulled out of the IPC deal. Reinsurance readers can be proud to note that their predictions were correct, with 54% predicting that 'Validus will gain control of IPC' - as announced by Reinsurance online - shortly before the July survey closed. Only 4% of you believed that Validus would abandon its bid for IPC, however, one reader would not have recommended Validus to go ahead with the deal: "IPC will be bought by someone else - but not Flagstone either!"

Staying west of the Atlantic, we asked readers for their views on Barack Obama's proposals for an Office of National Insurance that will control all US insurers: 59% of you agreed with Obama that "it's a good idea - the US hasn't had one of these before," 17% stated that they "don't really care" because it does not affect them, while 24% agreed with the sentiment "it's a terrible idea - it could cause problems for reinsurers." This final segment was, perhaps unsurprisngly, particularly vocal in its views: "It is better to leave the regulation at a state level because it has a proven record, as opposed to federal regulation," noted one reader. Another fumed: "It shouldn't take a rocket scientist to figure this one out. The state-by-state regulatory system exists for only one purpose: so that the states can have a large share of the insurance taxation pie."

Some of you even offered alternatives for the US President: "How about adopting international standards for risk-based capital such as Solvency II, though with some more study."

The results of the Greenberg v AIG trial have taken many of you by surprise. When asked to predict which would win before the verdict was announced, only 45% predicted that Hank Greenburg would come out victorious. "From what I've heard and read, Greenberg is getting clobbered. His testimony just doesn't hold up," remarked one respondent. The remaining 55% of you may feel a little red-faced, with the federal jury having ruled in July that CV Starr - the company run by former AIG chief executive officer Greenberg - did not breach trust when it ended an executive retirement scheme at the insurer over four years ago.

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