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We are entering what is known as a “hard market” in insurance, which may consist of increased premiums, reduced coverage, and fewer risks that insurers are able to write.
All aviation operations across Canada are likely to be affected whether they are a commercial or private aircraft owner, manufacturer, distributor, or maintenance organization.
A hard market is caused by a number of contributing factors that include falling investment rates, increases in fraudulent claims and larger global losses. In Canadian aviation insurance there are even more aspects to the changing market. The number of available insurers coupled with the weather, the value of the Canadian dollar, and the severity of losses all play their part.
All aviation insurers licensed to write in Canada are re-insured by global companies. A catastrophe across the world may not even make it into Canada’s news cycle, but the same re-insurers covering your operation might also be on the hook for a downed A320.
Canada is particularly susceptible to bad weather claims. A severe ice storm in Manitoba could lead to higher aircraft premiums across the country the following year.
The recent, and increasingly severe, aircraft claims have led to several insurers re-evaluating their underwriting practices and rate structure.
We are now coming off a long soft market where we had more insurers and lower rates.
As the losses accumulated over the last several years, some unprofitable insurers pulled out of the market. The remaining companies are forced to increase their rates in order cover all their claims and to regain profitability.
How does all of this affect Canadian aviation operators and aircraft owners?
For starters, you may see increases in your premiums, anywhere from five per cent to 40 per cent or higher, for large and small policies alike. You may see your deductibles increase and some fringe coverages, like lay-up and renewal credits, removed.
You might experience longer wait times to get answers back from your broker. With rates increasing, everything is being shopped and the marketplace is flooded with new requests, creating an overload on the same few underwriters.
In the absolute worst cases you may find your existing insurance companies declining to offer renewal.
Even if you are one of the lucky ones and your increase is minimal, it’s vital to work with an insurance broker who specializes in aviation. If your operation is insured with a broker just because they are your friend or they got you a good deal on your home insurance, they may not be aware of current aviation market trends and concerns.
An aviation insurance broker will have the knowledge and experience required to asses your risk. They will have a good idea of the going rates, required coverages, and the most favourable terms and conditions for you.
The best thing you can do is give your broker at least 60 days to negotiate your terms. By starting with plenty of time ahead of renewal they’ll be able to take your policy to all appropriate insurance companies and get you the best quotations.
Providing full information is imperative for large and small operators alike.
Be sure to mention any safety systems installed on your aircraft and don’t be afraid to highlight your safety management systems and what you do that’s over and above the norm.
You may also wish to pay particular attention to risk mitigating practices put into place after any claims you have experienced. It’s sometimes easy to forget what happened eight or 10 months ago, so an annual review with your broker is advantageous.
Read your policy and arm yourself with the knowledge to understand the quotations and remarks being provided to you. I am always impressed with those clients who read and ask questions.
Work with your broker to consider new methods of handling your risk. A good aviation broker can also help you calculate your self-insured retention appetite and other risk management cost saving methods. This may be the year to get creative with your insurance portfolio.
While it’s impossible to know exactly when a hard market will soften, with the increasing cost of claims we can assume it won’t be any time soon. Rates may never again be as low as they once were.
So please remember — read your policy, start your renewal early and consult with a knowledgeable aviation broker.
Sandy Odebunmi has been an aviation insurance broker for over 30 years, during which time she has specialized in general aviation and creating affordable solutions for her clients and aviation associations across Canada. She is now the vice-president of Aviation at Sound Insurance Services in Toronto.