Aviation insurance is a critical growth function in the near future. Across the globe, new airlines are commencing operations while current aviation players are increasing their fleet capacity.
The expansion in the sector would drive premium growth in the coming years. Aviation safety has an impact on all the stakeholders. The improvement in the safety scenario is evident from the fact that aviation insurance premiums were least for a period of time, before the aviation accidents in 2014.
At the same time, the exposure (probable loss) has increased by 50% since the beginning of the century. The reason could be due to both enhancing fleet values and increasing passengers.
The total exposures augmented from US$ 576 billion in 2000 to US$ 896 billion in 2014. It signifies that, if the exposure increases continue at the existing level, it would penetrate the US$ 1 trillion barriers by 2020.
A study of mega insurance claims (more than US$ 1.36m) reveals that airline accidents are the main reasons for the aviation sector’s revenue loss with regard to insurance claims generated (23%) along with their relating value (37%).
Advancements in aviation safety may be resulting in less disastrous losses. However, technology results in its own susceptibilities due to the increase in aviation cost (new materials, stringent regulations, and an increase in liability based litigation).
State-of-the-art aircraft require more time to be repaired while the cost of repairing outdated aircraft is also going up.
According to Lloyd’s chairman, John Nelson, “The most notable claims have arisen from the unusually high incidence of aviation losses, which have been sudden and tragic”. According to the firm, in 2014, Global insurance premiums to protect aircraft and other aviation assets were more than US$ 600m”.
Business assessment and supply chain risks are of great concern for aviation experts. The increase in competition, market stagnation, natural disasters, regulatory pressure, and technological upgradations are the other risks.
Scientists forecast turbulences would increase across the North Atlantic flight path in the coming years because of the environmental issues. The aviation sector could face increasing cyber-attacks.