Middle and Top Layers rates rise due to losses from Russia-Ukraine conflict and Boeing claims  

Aviation (re)insurance buyers are facing rate rises north of 150% on the middle and top layers of excel of loss (XOL) programs during the 1st April renewals, according to a report in The Insurer. 

1.4 renewals are a key date in the aviation reinsurance calendar, and market figures speaking to the publication suggested that two factors were behind the rate rises. One was the Ukraine conflict and the other was the Boeing claims from the grounding of the 737 Max in 2019. 

The Russia-Ukraine conflict has been a dominant issue in the aviation reinsurance market, with many planes owned by lessors companies trapped in Russia and ultimately seized by the Russian Government. The current legal cases involving lessors and insurers, as tracked by the Insurer, stand at $7bn. 

Also, the long-running and complex claims arising from the Boeing 737 Max grounding in 2019, continue to make its presence felt in the class. Last year, the aircraft manufacturer suffered a $1.3bn loss, pushing up the loss that underwriters involved in the Boeing case are facing, to an estimated $3bn. 

The publication reported a heightened focus on aviation war coverages following the Russia-Ukraine conflict, with a number of treaties seeing war cover broken out, with many cedants purchasing this on a standalone basis. 

These rate renewals have not occurred in isolation, with 1.1 setting the tone for the sweeping rises.  

Loss-free XOL programs saw rate increases of 100-150% on a risk-adjusted basis while loss-hit accounts were presented with rate rises of 150-200% according to Gallagher Re. 

Clearly, this environment while on the onset appears to be negative, does have notes of optimism. 

Prices will no doubt increase on outward reinsurance, but they in turn will be reaping the rewards of higher premiums on risks that they are underwriting. This cost increase will be partially passed onto the direct market, but that is through airlines paying the premium. Ultimately, underwriters and brokers in this class will be getting increased revenue for the service they are providing.