2021 Brings Tough Insurance Market for Airplanes, Copters & More

April 5, 2021

The aviation insurance market is feeling the pressure on rates and availability after 10 years of soft conditions. Eric W. Barfield, chief operating officer at Assured Partners’ Aerospace division, says this small specialty market has even lost a few underwriters in recent years, and that is leading to tougher conditions. Barfield talked with Insurance Journal’s Andrea Wells about conditions in the aerospace market and how it’s changing in the time of COVID.

Insurance Journal: How would you describe today’s aerospace insurance market?

Barfield: We had a soft market from probably from 2007 to 2017, after the worst hard market we ever saw post-9/11. By 2017, combined loss ratios started peaking north of a 100%. In 2017 we had roughly 16 carriers. It’s a very small marketplace. Today, at best, we have about 13 carriers, maybe a dozen carriers that are writing aviation insurance in the United States. At best, there’s $1.3 billion to $1.5 billion in premium dollars so it doesn’t take a whole lot of movement to shift the needle. And when you have three companies leave the arena altogether that makes for a quick shift. …

We thought in the fourth quarter of 2020 that reinsurance was going to be the eminent issue for 2021 rates. And yes, reinsurance is up but I don’t think that reinsurance was as bad as it could have been for the aviation market. … Rates are still up, but they’re not up as bad as they were last year. There’s still significant challenges in pockets of the industry, but it’s not quite the doomsday that I thought it might be at the end of 2020.

Insurance Journal: How is the underwriting process for aviation accounts different than in the past?

Barfield: Underwriters are definitely asking a lot more questions. They are much more inquisitive of what’s going on with the operation. It’s a small market. There are only 200,000 airplanes in the United States, for example, and there is no homogeneous exposure units because of those 200,000, they all do completely different things. You’ve got helicopters coming in and out of fields and helipads and hospitals. You have nice corporate jets landing on long runways. … But what they’re digging into is the operation, trying to get to know the operation better. …

For example, one jet might be flown with a two-pilot professional crew. That’s going to get the best rates. On the other end, maybe the jet is flown by a single pilot, an executive. They spend their days doing other things, selling real estate, selling insurance, or whatever. Then they hop in an airplane and fly from point A to point B. That market [owner pilot market] is very tough right now. Some underwriters are asking more questions on the pilot and their training because the best risk mitigation in this business is training. Also, where the airplane is being used? Is it flying in the Southeast? Is it regional? And where is the airplane based? Is it flying outside of country?

Insurance Journal: Has the pandemic impacted the aviation market in any way?

Barfield: In March, April, and May, there was definitely a dip, but then we saw it return. Then we saw a little bit of a bump in business. People that maybe previously didn’t have a corporate jet. Maybe they thought it seemed pretentious or something, but now they need to get executives from point A to point B and don’t want them on commercial airlines, so now they charter an airplane. … So our charter and management companies have seen an uptick in activity. … But there is an opposite side of that equation and that’s Alaska and Hawaii. They have just taken a beating because that’s a tourist sightseeing market. … A lot of those operators have had a tough time because the economy dried up compared to what it used to be.

Insurance Journal: Any outlook or other areas you are watching in aviation this year?

Barfield: So watching the challenges for sure in some pockets of the market, including the commercial rotor wing segment, or helicopters. Also, single pilot jets, those will continue to be a challenge. And older pilots. Pilots that are starting to get to 70, or older — those are becoming more and more challenging to insure regardless of the airplane that they might be flying. Those are real issues that are continuing to present challenges going forward in 2021.