Presented

By
Mr.Vijay Thakur
Contents
Airline Hull All Risks and Liability
Market Capacity
Airline Hull Deductible Market
AVN52E and Excess Third Party War Risks
Hull War Risks Cover
Summary
Airline Insurance Industry Cycle:
Airline Hull/Liability Premiums 1982-2009

So
4.0

ft
Premium
Linear Trend
3.5

3.0

2.5
US$ Billions

So d
ft ar
2.0 H
So

Hard
1.5
ft

1.0 r d
Ha
d
ar
H

0.5

0.0
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
World Airline Premium and Claims 2000-
2010
6.0
Premium
Claims
Average 10 Year Premium
5.0 Average 10 Year Claims

4.0
US$ Billions

3.0

Average Premium
2002-2009 $2.32bn
2.0

Average Claims
2002-2009 $1.41bn
1.0

0.0
00 01 02 03 04 05 06 07 08 09 2010
Maximum Limit Progression 1985-
2008
Hull Limit
Liability Limit
350
2,500

300

2,000
250
US$ Millions

200 1,500

US$ Millions
150
1,000

100

500
50

0 0
1985 1990 1995 2000 2009 1985 1990 1995 2000 2009
2009 Airline Premium & Rate
Movements
The figures shown in the table below represent those of Airlines that have renewed in 2009 only.

Hull Liab Expiring Renewal Prem Premium

Period Renewals AFV Pax
Rates Rates Prem (US$m) (US$m) Movement

1Q09 13 50% 2% -4% -1% $29.74 $42.02 41%

2Q09 49 1% -4% 8% 13% $191.59 $214.81 12%

3Q09 52 2% -11% 27% 42% $246.98 $297.03 20%

October 18 25% 4% 23% 26% $96.03 $125.82 31%

November 23 4% -1% 5% 14% $169.81 $204.46 20%

December 63 2% 0% 10% 14% $872.54 $1,036.00 19%

4Q09 104 3% 0% 13% 16% $1,138.39 $1,366.28 20%

Annual
218 3% -2% 15% 20% $1,606.70 $1,920.14 20%
Average/Total
2010 Airline Premium & Rate
Movements
The figures shown in the table below represent airlines placements renewing in 2010 only.

Hull Liab Expiring Renewal Prem Premium

Period Renewals AFV Pax
Rates Rates Prem (US$m) (US$m) Movement

1Q10 11 7% 3% 7% 9% $39.68 $44.80 13%

April 18 2% 10% -7% 2% $102.93 $110.47 7%

May 19 11% 15% -10% -8% $75.05 $77.22 3%

June 9 1% 6% -2% 2% $31.67 $37.43 18%

2Q10 46 5% 12% -7% -2% $209.65 $225.12 7%

July 16 12% 9% -16% -10% $154.24 $154.29 0%

Annual
73 7% 11% -7% -2% $403.57 $424.21 5%
Average/Total
Losses
Awards and minor claim levels are constantly
increasing
 Recent passenger liability awards have been influenced by US lawyers and
jurisdiction
 This has meant awards exceeding US$1m per passenger in countries where
they would have previously been substantially less
 Increases in minor losses are also having a significant impact on
underwriters bottom line
2009/10 Airline Losses:
Nett Hull losses in Excess of US$10m Shown

Avient
($67m)

Colgan Air Air France THY

US Airways ($19m) ($93m) ($47m)
($40m) FedEx
Afriqiyah Airways Emirates Air India
($123m) ($19m) ($17m & $50m)
American Airlines
($28m) Royal Air Maroc Saudi Arabian Kingfisher Bangkok Airways
($10m) ($19m & $14.3) ($18m) ($15m)
Yemenia
($34m)
Ethiopian
Satena Airlines Lion Air
($18m) ($39m) ($28m)

2009 Losses
2010 Losses

Total Hull/Liability Losses

2009 (including minor losses) – US$2.343bn
2010 (including minor losses) – US$0.733bn
Five Year Premium and Claims by Region(based
on declared figures for 2009 renewals)
4,000 Five Year Premiums
Five Year Claims
3,500
5yr Credit 5yr Credit
5yr Credit
Balance Balance
Balance
3,000 +US$1,701m +US$821m
-US$267m

2,500
US$ Billions

2,000

1,500 5yr Credit

Balance
5yr Credit -US$404m
1,000 5yr Credit Balance
Balance +US$117m
+US$184m
500

0
Africa Middle East Europe Asia Pacific North America Latin America
Five year Loss Ratios by Region
(based on declared figures for 2009 renewals)
Loss Ratio
200%
189.09%

180%

160%

140%
Loss Ratio
120% 110.87%
Loss Ratio %

100%
Loss Ratio
76.23% Loss Ratio
80% 70.22%
Loss Ratio
60% 54.71%
Loss Ratio
40% 34.67%

20%

0%
Africa Middle East Europe Asia Pacific North America Latin America
Airline Capacity to Accept Airline Risk:
Non-US Airline with a US$1.5 Billion Limit
Allianz (10%)
180% AXA (8%)
Tokio (1.5%) AA 19.50%
Munich Re (10%) AA- 27.00%
160% GAUM (7.5%)
Inter Hannover (5%) A+ 86.50%
Partner Re. (3.5%)
Generali (1%) A 7.30%
140%
A- 26.60%
BBB 0.50%
120% Chartis (12.5%)
Ace, Catlin, Swiss Re (10%)
BBB- 2.50%
Mitsui (6%) Other 17.15%
100% Amlin, Starr, Talbot, XL (5%)
QBE (4%) Total 187.05%
Faraday, (3%)
Antares, St Paul (2.5%)
80% Atrium (2%) It should be noted that
Kiln, Samsung (1.5%) underwriters are unlikely to
Axis (1%)
participate up to their
60% maximum capacity.
Aspen (3.3%)
Inter Aero (2.5%) The actual available capacity
LRA (13%)
SCOR (1.5%) Asia Capital (5%) is dependant on
40% KRIC (2%) a number of variables and
Maxs Re (4%)
Sirius (1.5%) underwriters desire to
Aviabel (1%)
20% SCR (0.50%) ADNIC (0.1%) participate on any particular
GIC, Ironshore (5%) risk.
Glacier Re (3%) Oman (2.5%)
MISR (1.25%)
0% PICC, New India (1%)
Oriental, (0.75%)
Nissay (0.15%
Aviation Hull Deductible Market
Principal Markets

XL
Chartis ACE Allianz Aspen Kiln Talbot Travelers
Insurance

 Talbot and Kiln have recently entered the

Secondary Markets
deductible market
 Rating is reasonably stable
 Very loss active (large number of claims but
St Paul HCC restricted limits)
 Marginally profitable area to some underwriters
 All markets write 100% of any individual risk
Excess AVN52: Third Party Liability
 Premiums are now at their lowest level since the introduction of this
cover and reductions are now minimal
 Premium levels are significantly short of the maximum insured limits
 Limits of US$1 billion or more being covered for an estimated total market
premium of around US$200 million in 2009
 The Excess AVN52 market has yet to suffer an insurable loss
 The market created in the wake of 9/11 has had the largest percentage
fall in premium levels since the highs of 2002
 An influx of capacity and competition has driven premiums down from
US$1.5 billion in 2002
 Some hull and liability underwriters are evidencing appetite to
increase sub-limits to US$250m
Excess AVN52: Third Party Liability

 An influx of capacity and competition has driven premiums down

from US$1.5 billion in 2002 to US$120 million in 2008
 The trend for premium reductions continued during 2009
 Premiums are now at their lowest level since the introduction of this
cover and reductions are minimal
Excess AVN52E Capacity:
Based on US$850m excess
US$150m
160% Allianz (10%)

Inter Hannover (10%)

AA
AA-
10.00%
10.00%
140% A+ 123.60%
A 2.50%

120% A- 2.00%

Axis (30%) Other 15.00%

Chartis (25%)
Total 163.10%
100% Swiss Re (20%)
Catlin, Starr (10%)
Brit (3%) Plus Berkshire Hathaway
Antares (2.5%)
80% Aegis, Amlin, Liberty (2%) (AAA) capable of writing
ARK (1.75%) US$1,000m
Atrium, Faraday, Hiscox, Pritchard, Markel, Talbot, XL (1.5%)
St Paul (1.25%)
ACE, Hardy, Watkin (1%) It should be noted that
60% Kiln (0.6%) underwriters are unlikely to
participate up to their
maximum capacity.
40%
The actual available capacity
is dependant on
a number of variables and
20% Aspen (2.5%)
Liberty Mutual (2%) underwriters desire to
Ironshore (10%) participate on any particular
Glacier (5%)
risk.
0%

2009
Aviation underwriting-Reinsurance
Underwriting factors
Debit credit balance
Government policies
Dgca
Airworthiness
CVC
Flight data digital recorder
Public knowledge of all losses
September 11 Crash
Mangalore crash
Hudson Crash