MARKETING A RISK MAY 2017

Transcription

1 MARKETING A RISK MAY 2017

2 PREPARATION Possibly the most important part of the Job Proper Preparation Prevents Poor Presentation (The 5 P s) Many ways to research Visits to clients Questionnaire s Internet Client visits to London/European Underwriters Limits and Coverage's required based on Leases, Covenants, ATC Requirements Many airlines (or their brokers) use models to predict probable maximum loss (PML)

3 PRESENTATION Helps Promote the risk to Insurers Professional looking Allows information to be delivered in concise and easy manner Brand Awareness Highlights any developments that have occurred during the prior year Risk surveys IOSA Audits Exposure Movements Claims Record

4 PRESENTATION Headline topics for any presentation given to the airline market are as follows: Executive Summary Overview Schedule of Aircraft - Development of Fleet Route Structure Traffic Statistics (Actual/Estimated) General Information - Pilots - Maintenance - Flight Ops - Flight Safety Procedures Premium/Claims History

5 KNOWLEDGE Majority of Aviation policies are placed on a subscription market basis due to the high limits purchased. TRADITIONAL INSURANCE AVIATION INSURANCE Sum Insured Sum Insured No of Risks No of Risks Principle of Insurance The premiums of the many pay for the losses of the few

6 KNOWLEDGE IDENTIFY THE PEER GROUP ANALYSE Average Fleet value and Aircraft type including age of aircraft, eastern or western built. Departure and Passenger Numbers Area of Operations Nature of Operations Low Cost Carrier Cargo Airline Charter Operation Legacy Carrier Loss Record

7 KNOWLEDGE IDENTIFY THE PEER GROUP (GA) ANALYSE Uses Utilisation Area of Operations (Helicopters) Onshore/Offshore Mountainous Military Pilot experience Make and Model Uses Loss Record

8 KNOWLEDGE IDENTIFY THE PEER GROUP (AEROSPACE) Service Provider / Manufacturer / Airport ATC ANALYSE Turnover Revenue Passenger/Aircraft movements Critical/Non-critical Contractual Arrangements GAMA IATA SGHA Exculpatory agreements Long tail/short tail Claims deterioration

9 KNOWLEDGE IDENTIFY THE PEER GROUP (LESSORS) ANALYSE Client List Geographical/Geopolitical Areas Exposure spikes Contractual Arrangements Coverage requirements Contingent/Possessed Sum Insured including exhaustion of operators limits Technical Records Repossession Expenses

10 Knowledge AFV vs. Hull Rate

11 Knowledge Cost Per Passenger

12 KNOWLEDGE RATING COMPARISONS Imperative to understand fully because the following are not always obvious Accounts with Sanctions, EU banned list or losses heavily penalised Leaders premium may not be the highest Some renewals have alleged significant swings between supporting underwriters terms Loss additional premiums (Loss A.P. s) Leader s fee Improvements in Coverage included within the premium (Grounding Liability) Differing liability regimes / conditions Agreed values or liability limits may vary Package policies i.e. HSL/HD/Excess 52/HW all placed with same leader.

13 KNOWLEDGE RECENT MARKET ACTIVITY We currently place more airlines than any other broker in the Market Therefore we constantly track: Leader Changes Broker Changes Premium and rating movements Losses Coverage and Limit improvements Placement Structures New Markets and security ratings

14 KNOWLEDGE POTENTIAL FOR GROUP PLACEMENTS / SEPARATE PLACEMENTS Number of Airlines placed together to create group placements Common ownership Code-sharing agreements Greater premium spend usually leads to lower rates Loss record could impact Group rates Leading to new products such as premium protection insurance Disbanding Group Placement actually leading to better premium for some (e.g. GCC) Largest airline usually major beneficiary as rates less likely to be impacted

15 KNOWLEDGE UTMOST GOOD FAITH (UBERRIMA FIDAS) Overriding principal of insurance Duty to disclose all material facts A material fact is any fact that would influence the mind of an underwriter when deciding to participate on a risk Losses Coverage Changes Known changes to operation going forward

16 KNOWLEDGE INSURANCE ACT 2015 Came into force on 12 August 2016 Introduces fair presentation on the part of the insured Remedies for breaches of fair presentation Any breach neither deliberate nor reckless does not automatically invalidate cover Abolition of basis clause Removes the ability of an insurer to deny cover for any breach under the policy if not relevant to the loss

17 SELECTION CHOOSING LEAD MARKETS Recognised leaders for different types of risk Wrong Leader can result in much higher premiums Potential conflicts for competing carriers easyjet / Ryanair JAL / ANA Boeing/Airbus Underwriters Knowledge / Experience Security Rating (S&P, A.M. Best s) - JLT Security committee constantly review Insurer s rating s Claims paying History / Service levels Appetite demonstrated for the risk Client Visits Knowledge of the client s operation Competitiveness

18 SELECTION WHAT MAKES A GOOD LEADER?? Or?? Or? Donald Trump (American President) Theresa May (UK Prime Minister) Kim Jong Un (Leader of North Korea)

19 SELECTION CHOOSING QUOTING MARKETS Obtain quotes from two or three selected markets to create competition Mindful of Capacity / Size of Order Analyse quotes to consider best alternative Price / Coverage Cheapest price might not always give the best final result Several Insurers now offering Package deals Personal Relationship

20 SELECTION CONDUCTING A LEADER REVIEW Market merges/acquisitions changing the face of recognised leads Number of key personnel have left or retired over recent years Number of Key personnel have moved insurers recently Appetite for markets to quote to secure a share has risen Time to consider a Leader Review?

21 SELECTION CONDUCTING A LEADER REVIEW Potential Candidate list of 3 to 4 leading Reinsurers Key questions Company Overview Proposed Underwriting and Claims Team Client / Underwriter Relationship Major Leads and examples of potential conflicts Number of visits to country in last 5 years Any innovation that they can bring to benefit the client

22 SELECTION CONDUCTING A LEADER REVIEW Advantages Sends message to existing lead to deliver exceptional result for the renewal Clear opportunity to have an open review Good practice in current market Disadvantages Can be time consuming for all involved Can damage relationship with existing lead Can influence discussions regarding premium adjustments Change of leader can complicate significant new or existing claims

23 SELECTION Recognised leaders include AIRLINES AEROSPACE AIG Allianz Aspen Axa Chubb Global Aerospace MS Amlin XL Catlin AIG Allianz Brit Chubb Global Aerospace MS Amlin Starr Companies XL Catlin

24 SELECTION Recognised leaders include GENERAL AVIATION AIG Allianz Atrium Axa Beazley Cathedral Chaucer Chubb Global Aerospace MSF Pritchard Starr Companies Swiss Re Talbot Tokio Marine HCC Tokio Marine Kiln Travelers W.R. Berkley XL Catlin Liberty Mutual

25 SELECTION Recognised leaders include LESSORS AIG Chubb Faraday Global Aerospace Hiscox Starr Companies 25

26 PLACEMENT STRUCTURE Having selected the Lead underwriter we now need to complete the placement by creating competition.

27 PLACEMENT STRUCTURE Different levels of competition based on available capacity Capacity influenced by Loss Record Nature of operations Sanctions Liability regimes (e.g. US / Japan) Pricing Leader Local retentions

28 PLACEMENT STRUCTURE US AIRLINE NON - US AIRLINE EU BANNED LIST No 74% Yes 141% Difficult 37% % Capacity 219% Capacity 141% Capacity Based on the perfect risk paying the ideal premium.

29 2017 AIRLINE INSURANCE INTERNATIONAL MARKET CAPACITY - NON US AIRLINES Capacity is reducing, based upon a liability limit of USD1.25b we estimate the total A rated capacity theoretically available for a non-us airline with healthy exposure growth and a good loss record to be in the region of 186%. Previously in Q this was showing as 212%. Opposite we show some factors effecting this reduction. The markets highlighted in BLUE have reduced their typical line size and/or have become highly selective and those shown in RED have withdrawn or are generally not utilising their airline capacity. Note, the line sizes illustrated are theoretical only and any capacity deployed by an underwriter is subject to their individual criteria. A number of factors including, price, loss record, geographical restrictions, sanctions, etc. will effect an underwriters line size and whether or not they choose to write an account. Market Typical S&P Rating ADNIC 1.00% A- Africa Re 1.00% A- AIG Europe 7.50% A+ Allianz (AGCS) 10.00% AA Allied World Europe 1.50% A- Altitude Risk Partners 5.00% A (Pool) Antares 1.50% A+ Apollo Aviation 2.00% A+ ArgoGlobal 2.00% A- ARK Syndicate 2.00% A+ Asia Capital Re 5.00% A- Aspen 3.33% A Atrium 2.00% A+ Aviabel 1.00% A- AXA Corporate Solutions 2.50% A+ Axis Bermuda 1.00% A+ Beazley 6.67% A+ BRIT 5.00% A+ Cathedral 2.00% A+ Chaucer 3.00% A+ Chubb Insurance 10.00% AA- Endurance Insurance 2.50% A+ Faraday 3.00% AA+ Fidelis Insurance 1.50% A- Generali 0.75% A (AM Best) GICI 2.00% A- (AM Best) Global Aerospace (GAUM) 7.50% AA- (Pool) Market Typical S&P Rating HDFC Ergo 1.00% A (ICRA) HDI Gerling 1.50% A+ Hiscox 3.00% A+ Houston Casualty Co. (HCC) 3.33% AA- Inter Hannover 3.00% A KRIC 2.00% A- La Reunion Aerienne 5.00% AA Liberty Mutual 4.00% A+ Mapfre Global Risks 5.00% A MS Amlin 5.00% A+ Munich Re 10.00% AA- MSF Pritchard 3.00% A+ New India 2.00% A- (AM Best) Oman Insurance Company 2.00% A Partner Re 5.00% A Samsung 2.00% AA- SCOR 2.00% AA- Sirius 2.00% A- StarStone 3.00% A- (AM Best) Starr Insurance 2.50% A+ Swiss Re 10.00% AA- Talbot 7.50% A+ Tokio Marine Kiln 2.00% A+ Travelers Syndicate 2.50% A+ Trust Re 1.00% A- W.R. Berkley 3.33% A+ XL Catlin 10.00% A

30 2017 AIRLINE INSURANCE INTERNATIONAL MARKET CAPACITY - US AIRLINES Based upon a liability limit of USD1.5bn we estimate the typical maximum US airline market capacity to be in the region of 186%. Market Typical S&P Rating AXA Corporate Solutions 5.00% A+ Inter Hannover 3.00% AA- La Reunion Aerienne 13.00% AA Mapfre Global Risks 5.00% A- Munich Re 10.00% AA- Partner Re 5.00% A+ Sirius 2.00% A- Chubb Insurance 7.50% AA- Amlin Syndicate 6.00% A+ Antares 1.50% A+ Argo Syndicate 1.00% A- Brit 5.00% A+ Endurance Insurance 2.50% A+ Faraday 3.00% AA+ Hiscox 3.00% A+ Liberty Mutual 2.50% A+ Mitsui 5.00% A+ Market Typical S&P Rating Talbot 5.00% A+ Travelers Syndicate 2.50% A+ Starr Insurance 12.50% A- USAIG 10.00% A+ W.R. Berkley 5.00% A+ XL Catlin 10.00% A Axis Bermuda 1.00% A+ Tokio Marine & Fire 2.00% AA- AIG 12.50% A+ Allianz 12.50% AA Allied World 3.50% A Altitude Risk Partners 2.00% A (Pool) Fidelis 1.50% A- Generali 0.75% A (AM Best) Global Aerospace 10.00% AA- (Pool) Swiss Re 10.00% AA- Star Stone 5.00% A- (AM Best) Total %

31 2016 AIRLINE INSURANCE INTERNATIONAL MARKET CAPACITY - LESSORS Market Typical Lessor Capacity S&P Rating Aviabel 1.00% A- AIG Europe 12.50% A+ Allianz (AGCS) 10.00% AA Altitude Risk Partners 3.50% A (Pool) We estimate the typical maximum Lessor market capacity to be in the region of 180%. Antares 2.50% A+ Asia Capital Re 5.00% A- AXA Corporate Solutions 5.00% A+ Axis Bermuda 5.00% A+ Beazley 6.67% A+ BRIT 5.00% A+ Chaucer 3.00% A+ Chubb Insurance 10.00% AA- Faraday 5.00% AA+ Global Aerospace (GAUM) 17.50% AA- (Pool) Hiscox 5.00% A+ Inter Hannover 5.00% AA- Kiln 5.00% A+ La Reunion Aerienne 12.50% AA Liberty Mutual 6.00% A+ Mitsui 5.00% A+ Munich Re 10.00% AA- Partner Re 5.00% A+ Starr Insurance 10.00% A+ Swiss Re 10.00% AA- Talbot 5.00% A+ XL Catlin 10.00% A Total % 31

32 PLACEMENT STRUCTURE NON -US AIRPORT US AIRPORT 481% Capacity 238% Capacity Based on the perfect risk paying the ideal premium.

33 PLACEMENT STRUCTURE NON -US GENERAL AVIATION US GENERAL AVIATION 1,505% Capacity 956% Capacity Based on the perfect risk paying the ideal premium.

34 PLACEMENT STRUCTURE As charts demonstrate different levels of over capacity exists Brokers job to create competition by verticalisation Insurers offered terms at differentials to leader Bottom up marketing Early negotiations to bind capacity at lowest possible terms Places pressure on underwriters holding out for higher terms Where low capacity / appetite exists verticals can go the other way - late negotiations allow underwriter advantage Layering Maximising capacity utilising primary and excess layers

35 PLACEMENT STRUCTURE Example of a good structure: 10% USD 1,000,000 (Leader) 20% USD 950,000 30% USD 900,000 40% USD 850,000 Good Structure (Composite Premium USD 900,000)

36 PLACEMENT STRUCTURE Example of a poor structure: 20% USD 1,200,000 50% USD 1,000,000 (Including Leader) 30% USD 950,000 Bad Structure (Composite Premium USD 1,025,000)

37 PLACEMENT STRUCTURE Ancillary coverage s usually purchased include: Hull War Hull Deductible Excess AVN52 Less frequently purchased include: Personal Accident Loss of Licence Loss of Use Aero Engine Breakdown Residual Value

38 PLACEMENT STRUCTURE HULL WAR Lessor requirement Historically underwritten in Marine market However more Aviation Syndicates & Companies involved Highly profitable to Insurers from 2001 to 2014 LSW555D / LSW617G/H 7 day notice of cancellation / 48 hour review clause JLT became first broker to place non-cancellable Hull War policy in 2014 large additional premiums charged by the market to allow operators to fly to more challenging areas ongoing charges to Afghanistan/Syria/Libya/Yemen and Iraq, but reducing as areas become more stable

39 PLACEMENT STRUCTURE No major loss suffered by market since 2001 until 2014 Total Hull War premium for 2014 around USD150,000,000 MH17, Tripoli Airport Attack, PIA and MH370 (AVS103 50/50 Clause) result in losses exceeding USD600,000,000 Desire for 100%+ Rate increases following Tripoli loss Market capacity increases due to rate changes Excess capacity reduces rate movements dramatically

40 PLACEMENT STRUCTURE 2015 continued to see a number of hull war losses Approximately US$90m of Airline Losses When combined with significant GA war losses, market suffered consecutive significant loss making year End of 2015 sees a number of Insurers withdraw from the market. 40

41 PLACEMENT STRUCTURE HULL WAR Aggregated cover Limits greater than USD1,000,000,000 can be purchased Recognised Leaders Aspen, Atrium, Cathedral, Liberty, Talbot, XL Catlin and TM Kiln Insurers becoming far more selective based on risk profile large additional premiums charged by the market to allow operators to fly to more challenging areas ongoing charges to known Hot Spots, but reducing as areas become more stable Capacity for large hull/spares values little more than 100% Aviation still remains a high profile target for terrorists

42 PLACEMENT STRUCTURE HULL DEDUCTIBLE Occasional Lessor requirement Majority of Airlines still purchase 100% markets only - no quota share New entrants into the class now means more choice than ever Ace, Aspen, AIG, Kiln, XL Catlin, CV Starr, ACR, ANV, Berkley, Allianz and Faraday Aggregated cover (Maximum USD10,000,000) Minimum excess point usually USD50,000 but can buy down to lower on case by case basis Single recorded incident, excludes: - Mechanical breakdown Wear and tear

43 PLACEMENT STRUCTURE EXCESS AVN52 Liability terrorism cover Introduced after September 11 th 2001 coverage limited to USD50,000,000 under HSL policies originally can now be excess of USD350,000,000 Recent development has seen certain underwriters offer up to 1BN worth of cover under the Hull and Liability policy No losses since cover introduced Despite recent Hull war losses and Airport attacks

44 PLACEMENT STRUCTURE EXCESS AVN52 No reduction in capacity despite dramatic drop in income Few Government indemnities exist, notably Brazil Premium estimates range from USD1,500,000,000 in 2002 to under USD80,000,000 in 2016 Layering very important when structuring the placement Broker facilities dominate the market

45 COMPLETION 100% placed or R/I order completed prior to inception date Brokers job to judge rates quoted so risk can be completed If offers exceed 120% then lead price could be considered too high If offers above lead are required too complete then lead premium too low This could have adverse effect on renewal as leader could look to readdress rates to regain his position If over capacity is evident then higher price markets my lose out Client always has final approval