AVIATION INSURANCE MAY
INCREASE 300% TO 1,000%
Capacity remains ample, but underwriters are
beginning to consider geographic risk tiers for
The other aviation coverage
impacted is primary hull and liability,
and underwriters there can be
expected to recover losses in upcoming
premiums. They’re also getting hit
with the July 24 crash of Air Algerie
Flight 5017, where terrorism was ruled
out, and the July 23 crash of TransAsia
Flight GE222, mostly likely caused by
“I do think the market will react
with rate increases,” Tuhy said,
indicating it’s been a soft market
looking for a rationale to pivot.
Still, underwriters aren’t panicking
because, as A.M. Best reported in a
briefing on MH- 17, no ratings actions
will result from the losses.
That, and the competitiveness in
the primary aviation market, means
“There still is an enormous amount
of capacity in the aviation insurance
marketplace, and that is keeping a lid
on the pot,” said Hanrahan, echoing
the conclusions of the Best report.
There could be a tiered
underwriting approach, Hanrahan
said, where insurers will break down
operators’ risk geographically —
where do they fly to, over and from?
XL confirmed that it has been
asking about plane flight paths, said
These terrible incidents do not
happen very often, he said, “but when
they do happen, they’re bad.”
— By Matthew Brodsky
airline practice leader in New York.
That includes paying out the full
property value of MH- 17 (which was
destroyed over Ukraine) as well as
half of the missing MH-370 (which
disappeared on its way to Beijing). All-risk aviation will take the other half
of the payout on the latter; common
practice in these “unknown cause”
Then, there’s the biggest event from
a monetary standpoint: a two-day
battle between rebel groups in July
that destroyed up to 12 aircraft at
Tripoli’s airport in Libya. This event’s
total losses could be upward of $500
million, Glod said.
While war hull underwriters
may not be panicking, as Hanrahan
suggested, they are looking to collect.
Paul Tuhy, head of XL’s global
aviation business, reported he’s heard
of rate increases in the market of 300
percent to 1,000 percent.
The horrors of airline disasters
have been flashing on cable news
for months, mostly focusing on the
disappearance of one Malaysian
Airlines flight and then the deliberate
destruction of another as it flew over
Nonetheless, the aviation insurance
industry on the whole appears to be on
“For the most part, there hasn’t
been a real knee-jerk reaction,” said
Garrett Hanrahan, U.S. aviation
practice leader for Marsh in Dallas.
“The market has been rational in the
way that it has approached what has
That’s saying something, given what
the market is facing.
The war hull market takes in $60
million in worldwide premium but is
looking at 10 times that in losses from
recent events, estimated Hanrahan’s
colleague, Brian Glod, Marsh’s U.S.
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AIRLINE HORROR stories began with the disappearance of a Malaysian Airlines flight.
WC FREQUENCY POISED TO
CONTINUE LONG-TERM DECLINE
Following a 2010 uptick, claims frequency has
declined for three straight years at an average rate
of about 3 percent per year.
The overall declining
frequency of workers’
comp claims continued
for the third year,
according to the National
Council on Compensation
increased 3. 5 percent in
accident year 2010, the
first significant increase
in frequency in 20 years,”
according to the NCCI.
“Following the 2010
uptick, claim frequency
has declined for three
straight years at an
average rate of about 3
that fears of job loss may
have delayed workers
from filing claims in
2009, which resulted
in the uptick in claims
frequency in 2010.
While the Great
Recession was likely
responsible for frequency
changes in recent years,
NCCI has detailed other
factors affecting recent
rates of injuries.
There has been a
significant decline in
frequency of claims
above $50,000 in
accident year 2012.
Such claims declined
by more than 7 percent,
while claims between
$10,000 and $50,000
declined by 3.1 percent,
and small claims
declined by just 1.4
Driving the decrease in the larger
claims category were fewer lower back
claims and fewer slip and fall injuries,
according to the report.
Over the last five years, the
frequency of injuries for most body
parts declined by 13. 9 percent while
the frequency of injuries involving
multiple body parts declined by 22
percent, according to the report.
The frequency rate for arm and
shoulder injuries, which represent 15
percent of injuries, remained flat.
“This may be influenced by an
older workforce,” according to NCCI,
“where rotator cuff injuries are not
In terms of the injury type,
frequency for permanent partial and
temporary total claims were consistent
with the overall decline of 13. 9
percent for all injury types, while fatal
and permanent total claims showed
more volatility each year, due to the
smaller volume of these claims.
The authors noted that the figures
were based on injury type first
reported and that the development of
claim counts can differ considerably as
they reach ultimate level.
Sprain/strain, comprising the
majority share of claims by nature of
injury, declined by 10 percent.
That compares to a decline of
17 percent for all other categories
The frequency of carpal tunnel
syndrome claims dropped by 25
percent, although the rate of decline
has slowed recently.
In terms of the cause of injury,
there was an 18 percent drop in the
frequency of cumulative injury claims
as well as a 23 percent drop in cut/
puncture/scrape injuries, possibly
because such injuries “may be
relatively more preventable through
loss control and safety measures.”
— By Nancy Grover
THE CLAIMS frequency of
injuries for most body parts
declined by nearly 14 percent.