Flight to quality - Financial security in the aviation insurance market
In the aftermath of major loss events, it became clear that an extended period of rate inadequacy followed by a catastrophic loss creates a precarious financial situation for many insurers. In the current environment, at least one additional critical factor has emerged: massive reduction of shareholder capital following the steady erosion of re/insurers' investment portfolios.
Risk managers, responsible for placing billions of dollars of insurance on behalf of airlines and aviation products manufacturers, may feel confident that they still have a financially sound panel of insurers, but do they know how strong their insurers' reinsurers are? Do they realise how much of their insurers' obligations are reinsured with the same few reinsurers? Do they know that many of their insurers have reinsurance with an aggregate limit that could be exhausted by just two catastrophic losses during the same contract period?
This new publication highlights the complex interactions of the volatile aviation re/insurance market and how they are coinciding with a general downturn in financial markets worldwide, creating a situation in which many re/insurers could experience serious financial difficulties. This brochure is addressed to all participants in the aviation insurance and reinsurance market and emphasises the need for vigilance and an uncompromising approach when selecting the quality of the security offered by insurers and reinsurers.
