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Aviation Insurance Market - Which Way Forward? November 2006 Charles.J.B. Searle.

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Presentation on theme: "Aviation Insurance Market - Which Way Forward? November 2006 Charles.J.B. Searle."— Presentation transcript:

1 Aviation Insurance Market - Which Way Forward? November 2006 Charles.J.B. Searle

2 2 Marsh Ltd Act I - Setting the scene abduction, seduction and destruction

3 3 Marsh Ltd The historic market cycle Hard and Soft Market Hard Market Soft Market Hard Market Soft Market Hard Market Soft Market

4 4 Marsh Ltd Act II - The current market environment A tragedy in waiting ?

5 5 Marsh Ltd Historical Airline Premium & Claims 1995 to 2005 to date $865m estimated margin before year becomes a loss Including estimated attritional losses

6 6 Marsh Ltd 2006 - Airline Capacity (Non - US major airline - based on US$1.5 billion) Rest of World: Al Khazna 0.15% Alliance Re 0.50% ADNIC 0.25% Aviabel 1.00% AXIS 5.00% Converium 2.00% Delvag 0.50% GIC 5.00% Glacier Re 2.50% Interhannover 4.00% Kric 3.00% Misr 0.50% Munich Re10.00% Nissay 0.20% Partner Re 3.50% QIC 1.25% Sirius White Mountain 2.50% Swiss Re 12.50% Tokio 1.50% French: LRA10.00% AXA 5.00% London: Allianz10.00% Aspen 2.50% Wurtt 1.50% Generali 1.00% AIG10.00% Global 12.50% Liberty Mutual 2.50% Lloyds: ACE10.00% Amlin 5.00% Atrium 2.00% Catlin 2.00% Faraday 4.00% Kiln 2.00% St Paul 2.75% Wellington 5.00% XL 5.00% New Capacity : Berkley Aviation 3.00% Dong Bu 1.00% Inter Aero 5.00% LIG 2.50% Max Re 3.50% QBE Limit 5.00% Starr Aviation 7.50% Total Competitive Capacity: 175.10%

7 7 Marsh Ltd Rating Indexes 20002001200220032004200520062000200120022003200420052006 Hull rates are at the same level as in 2000 RPK rates are still 100% higher than pre 9/11

8 8 Marsh Ltd Manufacturers Net Liability Premium Vs Liability Claims Millions 10 Year Summary (1996 - 2005) Total premium US$6,381m Total Claims US$4,930m Profit/Loss US$1,451mManufacturers Claims figures do not include IBNR nor have they been adjusted for inflated Annual Average Premium US$638m Annual Average Claims US$493m

9 9 Marsh Ltd Manufacturers Comparison of Loss Reserves 2003, 2004 Vs 2005 %/ $ Inc. in Reserves 118.4% $290m 35.0% $140m 87.9% $248m 106.0% $283m 180.0% $450m 120.0% $300m $1,711 million deterioration 0.0% $0m Million ($) 0.0% $0m

10 10 Marsh Ltd 2006 - Manufacturers Capacity (Non - US manufacturer - based on US$1.0 billion) Rest of World: AXIS 5.00% Converium 2.00% Glacier Re 3.00% Interhannover 3.00% Munich Re10.00% Partner Re 2.00% Swiss Re12.50% French: AXA 6.00% LRA 7.50% London: AIG10.00% Allianz15.00% Aspen 5.00% Generali 1.00% Global17.50% Wurtt 2.50% Lloyds: ACE15.00% Amlin 5.00% Catlin 5.00% Faraday 7.50% Kiln 2.50% St Paul 2.50% Wellington12.50% XL 5.00% New Capacity : Max Re 2.50% QBE Limit 5.00% Starr Aviation10.00% Total Maximum Capacity: 174.50 %

11 11 Marsh Ltd Tied up in red tape = +

12 12 Marsh Ltd 2006 - Airline Excess AVN52 Capacity (Non - US major airline - based on US$1 billion) Rest of World: AXIS30.00% Glacier Re 4.00% Interhannover15.00% Kric 3.00% Lancashire25.00% Swiss20.00% Tokio 2.00% Wurt 2.00% USA: Berkshire Hathaway100.00% (via Global) London: AIG25.00% Allianz10.00% Aspen 2.00% Liberty Mutual 0.50% Lloyds: ACE 5.00% Aegis 0.50% Amlin 2.00% Atrium 1.50% Brit 4.00% Catlin 4.50% CV Starr [1] 7.50% Faraday 2.50% Hiscox 1.50% Kiln 0.30% Liberty Syndicates 2.00% MAP 2791 1.50% PW Hardy 0.50% Reith 1.50% St Paul 1.00% Talbot 1.50% Watkins 1.00% Wellington 1.75% XL 2.00% Total Capacity: 277.55% [1] CV Starr to begin writing from 1/11

13 13 Marsh Ltd Third Party War Liability Rating History Initial $1.25 Surcharge + Additional for $1bn limit Surcharge rolled in at discount + Additional for $1bn limit Additional capacity drives rates down Development Ratio Using 2001 as base year 1.00

14 14 Marsh Ltd Act III - Which way forward Will the market go astray?

15 15 Marsh Ltd Landing and take off 2007 2008 2009 ?

16 16 Marsh Ltd A380 – too large to insure? 0 200 400 600 800 1,000 1,200 Now B747-400D Future A380 Max. Capacity Potential Maximum The introduction of the Airbus A380 in 2007 will mean a large increase in exposures to airlines and airports. The A380 will have an average seating of around 550, with a potential maximum (restricted to certain specific regions) of 990.

17 17 Marsh Ltd Looking at 60 of the major international airlines worldwide we can see that the majority buy $1.5 billion or above. Combined Single Liability Limit

18 18 Marsh Ltd The tip of the iceberg Are too few of the risks of the aviation industry insured in the Aviation Market? Insured Uninsured

19 19 Marsh Ltd Surviving the test of time

20 20 Marsh Ltd Marsh Ltd Aviation and Aerospace Practice Tower Place London EC3R 5BU Tel: 020 7357 1000 Fax: 020 7929 2705 The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. Marsh makes no representations or warranties, expressed or implied, concerning the accuracy of information contained herein or the financial condition, solvency, or application of policy wordings of insurers or reinsurers. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Insureds should consult their insurance and legal advisors with respect to individual coverage issues. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Marsh Ltd, except that clients of Marsh Ltd need not obtain such permission when using this report for their internal purposes. © Copyright 2006 Marsh Ltd All rights reserved. Marsh Ltd is a authorised and regulated by the Financial Services Authority


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