Calling 2017 another benign year for aviation claims in the Asia-Pacific region, insurance broker Aon nevertheless advised clients to resist resorting to so-called “cheap cover” in an effort to trim costs in a competitive environment so highly populated by low-fare carriers. The company noted that low-margin industries such as aviation carry a greater potential than most to feel the drastic effects of uninsured losses. On a positive note, last year the company said it saw growing maturity in the industry toward insurance purchasing, as an increasing number of clients procured coverage for previously uninsured risks such as cyber security.
“The capacity for cyber coverage is growing,” said Gary Moran, head of aviation, Asia, for Aon Singapore and vice-chairman of the Asian Business Aviation Association (AsBAA). Many aircraft operators don’t seem too worried about insuring against cyber security issues, mainly because they haven’t seen their competitors get burned by such problems, he explained. “But there could be a cyber attack in your supply chain, with serious complications for [your operation] as a knock-on effect. We have put together a cyber team here in Singapore to get that message out.”
Meanwhile, improvements in aircraft technology and industry risk management resulted in the safest year on record for the world’s airlines, according to Aon. The continuing benign claims environment resulted in further downward pressure on rates, and clients enjoying reductions in the range of 5 to 10 percent on average. However, even in the absence of catastrophic or large losses, the value of attritional losses increased. As the value of aircraft continues to rise, the value of everyday losses from bird strikes, hard landings, and other sources of minor incidents have increased in tandem, it added. Meanwhile, as the premium pool continues to shrink, the cost of attritional losses will become more of a concern for insurers as they begin to affect underwriting profitability.
For the business aviation community, Moran said, “the outlook is very good. [High] safety levels and high levels of pilot experience have helped keep losses to a minimum in Asia, and thus insurance costs have been fairly steady. “Operators are not getting the reductions they once had,” he said, adding that he doesn’t expect insurance premiums to “harden” or climb unless a catastrophic event somewhere in the world demands a heavy amount of insurance funding to cover losses.