plane talking - JLT Specialty

PLANE TALKING
AVIATION NEWSLETTER Q2 2015
LEAD LINES
RENEWAL ANALYSIS
LOSS ANALYSIS
ALSO IN THIS ISSUE
Is History Relevant?
The majority of Q2 renewals
showed some sort of growth
in either average fleet values
and or passenger...
After an unfortunate first
quarter in the aviation industry
in terms of high profile losses,
we continued to...
Market News
With recent losses nearing
the USD1bn mark, versus an
annual premium pot of...
Page 2
Page 4
Page 6
10/13
Rating Changes
10
Arrivals & Departures
11
Paris Air Show
13
Executive Summary
ENTERING UNCHARTED TERRITORY
We find ourselves mid-way through another interesting year in the aviation insurance market. After experiencing a turbulent period
in the first quarter with mixed market conditions and some high profile losses, the second quarter was in comparison somewhat
more subdued, however that’s not to say that it was quiet, as this wasn’t the case.
On the renewal front at present it would appear that market conditions still remain favourable to buyers. Evidence so far in 2015
would seem to suggest that conditions are slowly moving towards a return to a similar environment as seen prior to last year’s major
losses.
The market has however continued to experience losses in both the Hull and Liability and Hull War sectors placing further pressure
on it. Whilst we are told safety rates are improving, risk exposure increases year on year, as do attritional losses, costs and liability
awards, yet premium volumes continue to reduce leaving little left to cover catastrophe claims.
Many underwriters feel this position is not sustainable, and a handful have recently withdrawn from aviation or a particular sector of it
and are focussing on other lines of business that they deem more profitable. Whilst these markets are relatively small and have little
influence on general levels of capacity, the overall situation must continue to be monitored and still has the potential to be a catalyst
for change.
As our Lead lines contributor comments “how can anyone begin to make any sense of the rationale behind today’s market?” It has
been evident for some time that the traditional market “model is broken” and therefore we remain in uncharted territory. 
2 AEROSPACE | PLANE TALKING | Q2 2015
PROFILE
Is History Relevant?
With recent losses nearing the USD1bn mark, versus an annual
premium pot of USD90m, how can anyone begin to make any sense
of the rationale behind today’s market?
The past 18 months has been the most
costly period for Aviation Hull War
underwriters in the history of the class.
So why aren’t rates increasing?
BRUCE CARMAN
AVIATION UNDERWRITER CATHEDRAL SYNDICATE 3010
Bruce is an aviation underwriter with
Cathedral Syndicate 3010, (Part of the
Lancashire Group) and specialises in
Aviation Hull War. Prior to joining Cathedral
in October 2014, he was with Atrium
Underwriting for 27 years.
Bruce is a member of the International
Union of Aerospace Insurers (IUAI) Airline
Study Group, International Director of the
Aviation Insurance Association (AIA) and
Deputy Chairman of the recently formed
Lloyd’s Market Association (LMA) Aviation
Hull War Forum, he is a Chartered Insurer
and an Associate of the Chartered
Insurance Institute.
SUMMARY OF RECENT MAJOR
HULL WAR LOSSES
Risk
Date of
Loss
Comment
LAM Airlines
Suspected suicide
29/11/13 (currently settled
50/50).
Unknown cause of
Malaysia (MH370) 08/03/14 loss (currently
settled 50/50).
Insurgent attack at
airport.
Karachi Airport
08/06/14
Tripoli Airport
13/07/14 Islamist-led militia
(Various) attack at airport.
Malaysia (MH17)
17/07/14
Shot down over
Ukraine.
Germanwings
24/03/15
Suspected Pilot
suicide.
Yemen
Presidential aircraft
02/04/15 destroyed by
coalition bombing.
Felix Airways
Aircraft destroyed
28/04/15 by fire following an
air strike.
The expressions “the model is broken”
and “rates have to go up” have both
been used in recent months. Neither is
an inaccurate observation for a class in
distress that, for some reason, has
disappointed to conform to the expected
post loss, knee-jerk reaction of
underwriters increasing rates. The
“payback” that has traditionally made the
class so attractive is not there.
Aviation Hull War is a relatively young
class and owes its origins to the Hull War
and Allied Perils exclusion imposed by
the Aviation market after a series of
losses in the late 1960’s. With the
exclusion came the creation of a
separate class in 1970 with Marine
underwriters at Lloyd’s underwriting
Aviation War exposures alongside their
established Marine War book. In a similar
fashion, the Excess AVN52 (Third Party
War Liabilities) class was created in the
immediate aftermath of 9/11, where yet
again, the Aviation market excluded War
exposures due to the systemic risk
associated.
In the 45 years since its creation, the
class has experienced a few high profile
losses involving multiple aircraft that have
effectively defined the class. The first
catastrophic event occurred when
Saddam Hussein invaded Kuwait airport
on 2 August 1990, resulting in a market
loss of USD600m. Lloyd’s syndicates’
size at that time effectively meant that
those involved took a significant hit to
their bottom line. The market reacted by
increasing rates for Middle Eastern
operators and levied additional premiums
on others flying in. Key factors to the
market’s reaction were:
•
Everyone had lost money and
wanted to recoup their losses.
•
There were few recognised leaders
(four) of the class.
•
Capacity was scarce.
•
All underwriters wrote facultative lines
(each risk was underwritten
independently and not on a portfolio
basis).
Eleven more years passed before the
class experienced another catastrophic
event and during this time, a more
resilient form of capital in the shape of
corporate capacity emerged in 1995, to
sit alongside the unlimited liability
Members of Lloyd’s.
Most think 9/11 was the next big event,
however it wasn’t, nor was it the most
costly for Hull War insurers. On 24 July
2001, Tamil Tigers attacked Bandaranike
airport, resulting in a USD382m loss and
contrasting the then USD35m premium
base.
Most significant was the market’s
reaction after this event. With losses
totalling more than ten times the market’s
premium, there was a keen desire
amongst underwriters to increase rates.
What happened next and how it would
have played out had 9/11 not occurred,
we will never know. The airline policies
that renewed in the following seven
weeks experienced rating increases of
only 25% and not of the quantum sought
by many underwriters.
To compare the post loss market to the
one immediately after Kuwait, naturally
there was a desire to recoup losses
coupled with very few leaders, however
the significant difference was the
abundance of capacity and continued
existence of broker facilities.
Continued on page 3 
www.jlt.com
| Plane Talking 3
“The “Buyer’s
Market” will
continue until
the current
naive capacity
withdraws or
becomes
more selective
in its risk
selection and
underwriting.”
 Continued from page 2
Had all accounts renewed in 2001 with a
25% rate increase, the market’s income
would have risen to a meagre USD44m.
Needless to say, the events of 9/11
altered everything.
“The past 18 months has been
the most costly period for
Aviation Hull War underwriters in
the history of the class. So why
aren’t rates increasing?”
Whilst the total Hull War loss for all four
aircraft was only USD130m, the net
effect of the event was an aversion to all
War and Terror classes overnight. There
was, in effect, a capacity vacuum and
with it, the broker line-slips disappeared.
The resulting landscape was akin to post
Kuwait; there was a resolve to recoup
losses, only a handful of leaders and with
the severe scarcity of capacity,
underwriters returned to facultative
underwriting - and the market achieved
“payback” for the losses.
Where are we now? Well, much like
London busses – you wait for ages and
then three come along at the same time,
no major event for nearly 14 years and
then, four in the space of four months!
Initially there was a series of major losses
(MH370, Karachi and MH17), then on 13
July 2014, militia attacked Tripoli airport,
destroying multiple aircraft over a ten-day
period. Two Libyan operators suffered
catastrophic loss of aircraft, well in
excess of the USD400m aggregate
policy limit they jointly purchased. These
losses coupled with fixed and rotor wing
losses (estimated at USD100m) made it
the most expensive loss since Kuwait,
the ultimate figure easily surpassing
USD700m if including the loss of
uninsured aircraft.
Not surprisingly, underwriters were
reeling from the cumulative effect of
losses and brokers approached clients to
prepare them for the potential market
backlash and subsequent uplift in
renewal premiums.
What happened next? The general
market expectation was for premiums to
increase. However in order for that to
happen, it required capacity to withdraw
and for underwriters to return to basic
principle of underwriting each risk
individually.
Capacity did not exit and with the
potential of greater premiums a number
even increased their lines. Meanwhile,
others saw what they thought was an
opportunity and entered the class.
So, in trying to make sense of where we
are now, we do not have the right
ingredients required for a correction to
the current inadequate pricing:
•
Everyone has lost money and wants
to recoup their losses.
However...
•
The market is not selective and will
effectively follow any number of
leaders in the class.
•
Capacity is abundant.
•
Underwriters continue to follow the
fortunes of the broker line-slips and
do not evaluate each risk, instead,
committing to the equivalent of a
tracker on an annual basis.
Yet again, we find ourselves in a position
where losses are greater than ten times
the annual premium and the market is
effectively where it was in 2001, post
AirLanka.
The “Buyer’s Market” will continue until
the current naive capacity withdraws or
becomes more selective in its risk
selection and underwriting.
If history has taught us anything, it has
shown us the need for underwriters and
operators to understand ground
accumulation exposures and not blindly
wait for the next catastrophic multi
aircraft event.
Want to feature in Lead Lines? If so please
contact us at: [email protected]
4 AEROSPACE | Plane Talking | Q2 2015
Renewal Analysis
EXPOSURES
PREMIUM
RATES
The majority of Q2 renewals showed
The combined premium reduction, on a
The combined rate reduction for Q2 was
some sort of growth in either average
like for like basis, for Q2 is down around
around -11%. Whilst this figure is
fleet values and or passenger numbers,
-8.8% over the same period last year.
someway off of the figure witnessed in
albeit at varied levels.
As we have commented before the airline
industry appears to be in good health. In
fact IATA recently predicted that 2015
industry profits will almost double that
seen last year, due to a number of
factors.
The Paris Air Show also provided
From our analysis of Q2 renewals it
would appear that the majority of
accounts received some degree of
premium reduction.
the same period last year of -20%, all
evidence so far in 2015 would seem to
suggest that conditions are slowly
moving towards a return to a similar
environment as seen prior to last years
Those accounts that did not, were
generally based in regions perceived to
be higher risk and or they had adverse
loss histories.
major losses.
Renewals are being treated on a caseby-case basis, however it would appear
that this stance could be softening with
optimism with some significant aircraft
recent reductions far more consistent
orders placed during the week, ensuring
than was witnessed 6 months ago.
that manufacturers books remain full for
That said we must still be mindful that
the foreseeable future.
the market situation remains fragile.
Year on Year Exposure % change.
Year on Year Premium % change.
Q2. 2014 vs. Q2. 2015 (Like for Like basis), and
year to date. Based on the latest Information as
at 30 Jun. 2015. Source: JLT
Year on Year Rate % change.
Q2. 2014 vs. Q2. 2015 (Like for Like basis), and
year to date. Based on the latest Information as
at 30 Jun. 2015. Source: JLT
15%
15%
10%
10%
10%
5%
5%
5%
0%
0%
0%
-5%
Change
15%
Change
Change
Q2. 2014 vs. Q2. 2015 (Like for Like basis), and
year to date. Based on the latest Information as
at 30 Jun. 2015. Source: JLT
-5%
-5%
-10%
-10%
-10%
-15%
-15%
-15%
-20%
-20%
-20%
-25%
Q2 2015
A Average Fleet Value
-25%
Passengers
-
Q2 2015
Hull
Liability
USDm
Total
USDm
2014
75
120
195
2015
67
111
179
-10.3%
-7.8x%
-8.8%
% Change
* At lead terms
Q2 2015
Hull
Liabilities
Hull
USDm
Premium
-25%
Liabilities
| Plane Talking 5
www.jlt.com
Renewal Comment
Q1 RENEWALS
Included in our database for Q2 we have
FORTHCOMING
RENEWALS
58 airlines renewing, of which 17 have
July is considered the first significant
expiring average fleet values in excess of
renewal month of the year for the airline
USD1 billion.
insurance market, with a large selection
The largest renewal of Q2 by someway is
the International Airlines Group (IAG)
July Renewals
The 5 largest airline renewals in July are
shown in the table below:
Airline
Renewal
Date
of major airlines and some substantial
accounts renewing.
Expiring
AFV
USD
Hainan Airlines Group
1 Jul
20.1bn
which includes carriers such as British
In July around 45 carriers renew, of these
Federal Express
1 Jul
15.0bn
Airways, Iberia, Aer Lingus, LAN and
around half have fleets valued in excess
Aeroflot Group
1 Jul
11.7bn
TAM amongst its consortium members.
of USD1 billion. The renewals in July
Ethiopian Airlines
1 Jul
5.0bn
Republic Airways
1 Jul
4.2bn
Japanese carrier All Nippon Airways was
the second largest renewal of the
quarter, followed by Lion Air, easyJet and
Virgin Australia.
Flag carrier Sudan Airways was a new
addition to the Q2 list following its
renewal in June, the carrier having
extended its policy earlier in the year from
March.
produce more premium than the first six
months of the year combined and
therefore provide a true picture of market
conditions.
August Renewals
This year, in July, a number of additional
accounts also come to market, having
extended their respective policies earlier
in the year. These include the Hainan
The 5 largest airline renewals in August
are shown in the table below:
Airline
Airlines Group and Aigle Azur both of
Renewal
Date
which opted to extend their policies
Uzbekistan Airways renewed in June with
earlier in the year.
Alaska Airlines
5 Aug
4.5bn
The Hainan Airlines Group now replaces
Pegasus Airlines
24 Aug
2.5bn
a change of broker after switching from
UIB to Willis.
Expiring
AFV
USD
Federal Express to become the largest
Skymark Airlines
1 Aug
2.4bn
There were also a number of carriers in
renewal in July, with an expiring fleet
Monarch Airlines
1 Aug
1.7bn
Q2 that opted to extend their policies
valued at around USD20bn.
Small Planet Airlines
15 Aug
228.0m
meaning that they will now renew later
this year. These include, flag carrier
Royal Brunei Airlines which extended
from May to December, Aigle Azur which
Sky Airline of Chile comes to market this
year with a change of broker after
switching from Aon to JLT.
extended from April to July and
Kuwait Airways which usually comes to
Cameroon Airlines which extended from
market in July opted to extend its policies
April to September.
meaning that it will now renew in
From our analysis of Q2 renewals there
was little of note to comment on with no
unusual or surprising results witnessed.
As mentioned, overall the current market
conditions remain favourable to buyers.
December.
September Renewals
Additionally the 5 largest airline renewals
in September are shown in the table
below:
Airline
Renewal
Date
Expiring
AFV
USD
InterJet
9 Sept
2.2bn
Jet Time
1 Sept
462.8m
Windrose
30 Sept
351.1m
Tarom
1 Sept
240.8m
Vistara
11 Sept
237.4m
Source: JLT Database
6 AEROSPACE | Plane Talking | Q2 2015
4
Loss Analysis
APRIL LOSSES
Yemenia/Yemen
Government
01/04/2015
0 Fatalities
Boeing 747SP
(7O-YMN)
APRIL LOSS
SUMMARY*
Yemen
A presidential B747 aircraft was destroyed whilst parked at Aden Airport, Yemen,
when armed militants attacked the airport. Note, the exact date of loss is uncertain.
Gazpromavia
04/04/2015
0 Fatalities
An-74-200
(RA-74056)
HULL LOSS ESTIMATE:
USD 92.80m
LIABILITY LOSS ESTIMATE:
North Pole
Nil
The aircraft flying in support of a Polar Expedition, made a hard landing at Barneo Ice
Base near the North Pole, causing structural damage to the undercarriage.
NUMBER OF FATALITIES:
2
UTAir Express
11/04/2015
0 Fatalities
ATR72-212
(VQ-BMB)
Russia
All Known Airline Losses Net of
Deductible
Landing at Nizhny Novgorod on a domestic scheduled passenger flight, the aircraft
veered off the runway causing damage to a propeller.
100
Carson Air
13/04/2015
2 Fatalities
SA226 Metro II
(C-GSKC)
Canada
80
Jet Airways
13/04/2015
0 Fatalities
Boeing 737-800
(VT-JGA)
USDm
The cargo aircraft crashed in wooded terrain whilst performing a flight from
Vancouver to Prince George. Both crew members died in the accident.
India
40
On roll out from landing at Khajuraho, the port undercarriage collapsed leaving the
aircraft resting on starboard, nose undercarriage and port engine.
Asiana Airlines
14/04/2015
0 Fatalities
Airbus A320-232
(HL7762)
Japan
20/04/2015
0 Fatalities
ATR72-600
(PK_WGS)
Indonesia
The aircraft suffered a heavy landing at Sumbawa Besar with damage reported to
landing gear and wing/fuselage fitting.
THY Turkish Airlines
25/04/2015
0 Fatalities
Airbus A320-232
(TC-JPE)
Turkey
The aircraft suffered substantial damage in a landing accident at Istanbul Ataturk
International Airport. No fatalities were reported.
Felix Airways
28/04/2015
0 Fatalities
CRJ-701ER
(7O-FAA)
20
0
APR. 2014
The aircraft, with 74 passengers and 7 crew, suffered substantial damage to the left
wing, number 1 engine and tail section in a landing accident at Hiroshima Airport.
Wings Air
60
Yemen
Whilst parked at Sana Airport, the aircraft was destroyed by fire following an air strike
attack by Saudi led coalition forces.
Hull
APR. 2015
Liabilities
*Figures shown are provided only as a guide. Not
all losses include a reserve estimate and are
reflected in the figures. Excludes Hull War hull
reserves. Source: JLT.
www.jlt.com
| Plane Talking
7
5
MAY LOSSES
Air Libya
MAY LOSS SUMMARY*
09/05/2015
0 Fatalities
BAE 146-300
(5A-DKQ)
Libya
HULL LOSS ESTIMATE:
USD 16.75m
The aircraft was set on fire by militants during fighting at and near Dahra Airport.
LIABILITY LOSS ESTIMATE:
Nil
Airbus Defence &
Space
09/05/2015
4 Fatalities
Airbus A400M
(EC-403)
Spain
NUMBER OF FATALITIES:
4
The aircraft was performing a manufacturer's test flight when it developed engine
problems and crashed shortly after takeoff. Four of the six crew died. Note as this
loss involved a ‘test’ aircraft the hull claim will be paid under the manufacturer's
aviation ‘product liability’ policy.
Joy Air
10/05/2015
0 Fatalities
XIAN MA60
(B-3476)
All Known Airline Losses Net of
Deductible
China
100
The aircraft suffered a runway excursion during landing at Fuzhou Airport which
caused the wings to fail. No fatalities were reported amongst the 45 passengers and
7 crew.
11/05/2015
0 Fatalities
CRJ-200
(N932SW)
USA
During the approach to Los Angeles International airport, the port undercarriage
failed to extend. The aircraft was subsequently landed with gear retracted causing
damage to fuselage belly and port wing.
USDm
Skywest Airlines
80
60
40
20
0
MAY. 2014
Hull
MAY. 2015
Liabilities
*Figures shown are provided only as a guide. Not
all losses include a reserve estimate and are
reflected in the figures. Excludes Hull War hull
reserves. Source: JLT.
8 AEROSPACE | Plane Talking | Q2 2015
6
JUNE LOSSES
Aeronaves TSM
JUNE LOSS
SUMMARY*
02/06/2015
5 Fatalities
SA226 Metro II
(XA-UKP)
Mexico
HULL LOSS ESTIMATE:
The aircraft, performing a post-maintenance test flight with 3 passengers and 2 crew,
crashed shortly after takeoff from Queretaro Airport. There were no survivors.
USD 4.00m
LIABILITY LOSS ESTIMATE:
Trans Maldivian
Airways
11/06/2015
0 Fatalities
DHC-6-300F
(8Q-MAP & 8QTMG)
Nil
Maldives
Two float equipped Twin Otter aircraft collided. Aircraft 8Q-TMG, was water taxiing
from a dock when its propeller struck the rudder of the stationary aircraft, 8Q-MAP,
causing significant damage to the rudder and propeller/engine.
Scat Airlines
16/06/2015
0 Fatalities
Boeing 737-300
(LY-FLB)
NUMBER OF FATALITIES:
5
All Known Airline Losses Net of
Deductible
Kazakhstan
The aircraft had been unloaded following a domestic flight from Astana to Aktau and
was being prepared for the next flight when a fire broke out in the forward cabin
causing substantial damage.
200
USDm
150
100
50
0
JUN. 2014
Hull
JUN. 2015
Liabilities
*Figures shown are provided only as a guide. Not
all losses include a reserve estimate and are
reflected in the figures. Excludes Hull War hull
reserves. Source: JLT.
www.jlt.com
| Plane Talking
9
Q2
Loss Summary
HULL ALL RISKS
HULL WAR
After an unfortunate first quarter in the
After witnessing a string of Hull War
aviation industry in terms of high profile
incidents at the start of 2015, loss activity
losses, we continued to experience
continued throughout the second
losses in the second quarter. Fortunately
quarter.
provided the market with some
significant claims.
Similarly to the Karachi and Tripoli airport
a number of Hull War losses in the
second quarter involving aircraft which
The two largest losses of the second
were destroyed whilst parked at various
quarter came in April and were the result
airports during fighting.
of landing accidents with both of the
aircraft being declared a Constructive
Total Loss (CTL) due to the extent of
damage each sustained.
which involved a Yemenia Airlines
witnessed in Libya.
0
Q2 2014
figure to around USD71 million for the
year to date. We must note that this
Airbus A400M aircraft which crashed
figure only includes known and
whilst on its first pre-delivery test flight.
confirmed losses and as fighting
As this loss involved a ‘test’ aircraft the
continues in these regions we expect
significant hull claim, in excess of
further claims to filter through.
Despite recent losses in the sector the
Liabilities
*Figures shown are provided only as a guide. Not
all losses include a reserve estimate and are
reflected in the figures. Excludes Hull War hull
reserves. Source: JLT.
2012 - 2015 YTD vs. 5 Year
Average Losses**
Hull War market appears to have, for
2000
now at least, stabilised. We are once
The losses in the second quarter now
again seeing reductions or “as before”
bring the combined 2015 Hull and
pricing and it is clear that conditions have
Liability figure at around USD610 million
softened. That said we must reiterate
for the year to date (excluding
that renewals continue to be treated on a
attritionals).
case by case basis, therefore the results
These recent losses will continue to keep
Hull
quarter bring the 2015 Hull War loss
second quarter was that of the new
policy.
Q2 2015
The losses experienced in the second
Another loss worthy of note in the
manufacturer's aviation ‘product liability’
50
presidential B747 aircraft which was
runway/landing accidents in the second
USD100m, will be paid under the
100
albeit at different airports, the largest of
destroyed. There were also further losses
value in comparison.
150
Two of these losses took place in Yemen
Whilst the market experienced other
quarter, they were all relatively minor in
200
incidents witnessed in 2014, there were
USDm
or no loss of life, however they still
All Known Airline Losses Net of
Deductible*
seen still remain extremely varied.
pressure on the market, but at present
Hull War capacity remains plentiful,
they appear to have caused little change
however we have recently witnessed
in market conditions.
some smaller markets withdraw or opt to
1500
USDm
the majority of these losses involved little
Q2 LOSS SUMMARY
5 Year Average
1000
500
stop writing the coverage, as they now
deem the business unprofitable. Whilst
this does little to impact overall levels,
underwriters are becoming increasingly
concerned with rising claims in this
sector and a continuation of losses could
well have a greater impact on both
capacity levels and ultimately pricing
within the sector going forward.
0
2012
2013
2014
2015 YTD
**Figures shown are provided only as a guide. Hull
& Liability combined, includes an attritional estimate
and excludes hull reserves for Hull War losses.
Source: JLT.
10 AEROSPACE | Plane Talking | Q2 2015
Market News
NEW MARKET - FIDELIS INSURANCE
HOLDINGS
BARENTS RE TO ENTER THE
GENERAL AVIATION MARKET
Fidelis Insurance Holdings Limited
(Fidelis), a newly formed specialty
insurance and reinsurance provider
has announced that it has secured
approximately USD1.5 billion in equity
capital, from three private-equity firms
and other investors.
Barents Re entered the General
Aviation Insurance market 1 May 2015
as a supporting carrier. Barents Re is a
Panamanian Reinsurance company
with a Paris branch office. The
company has a financial strength rating
of “A-” (Excellent) with positive outlook
from AM Best.
This marks one of the largest industry
capital raises ever, and immediately
makes Fidelis an important new
underwriter in the global market.
The Company has recently received an
AM Best rating of “A-” (Excellent).
Fidelis was founded by British
insurance-industry veterans, Richard
Brindle, who will serve as Group CEO
and CUO, and Neil McConachie, who
will be Group CFO. Previously, both
Brindle and McConachie enjoyed
success as founding members of
Lancashire Holdings.
The company announced that it would
approach the insurance and
reinsurance business differently than
most traditional insurers. The resulting
business model that Fidelis will follow
features “an innovative structure to
tactically shift capital between
insurance and investments based on
prevailing market dynamics.”
Fidelis will underwrite a book of
insurance and reinsurance business,
with a focus on specialty classes of
business where its team has significant
experience, such as the property,
energy, marine and aviation risk
classes.
The Company said it expects to begin
underwriting immediately.
SIGNIFICANT RATINGS
CHANGES
•
Ratings agency AM Best has
revised the outlook of specialty
insurer Torus to stable from
negative. At the same time the
rating agency also affirmed Torus’
“A-” financial strength rating.
•
Ratings agency Standard & Poor’s
(S&P) has assigned Ageas
CNA HARDY TO EXIT AVIATION
MARKET
Insurer CNA Hardy ceased writing
Aviation insurance business with effect
1 May 2015, following a strategic
review of its portfolio.
In a press release the insurer said “A
review of our current book of aviation
business confirmed that to maintain
relevance and achieve a balanced
portfolio we would need to grow our
account significantly. Given challenging
market conditions and the availability
of capacity, it is apparent that we will
struggle to increase market share
whilst building a profitable book of
business. In addition, the firming of
rates and terms and conditions hasn’t
materialised to the degree we hoped.
We are committed to maintaining
underwriting discipline and for this
reason we have made the strategic
decision to withdraw from the Aviation
sector with immediate effect.”
Insurance Limited an “A-“ rating
with a positive outlook.
•
Ratings agency AM Best has
affirmed the financial strength
rating of “A” (Excellent) and the
issuer credit ratings of “a” of
Markel Bermuda Limited and its
affiliated operating companies.
•
Ratings agency AM Best has
affirmed the financial strength
rating (FSR) of “A” (Excellent) and
the issuer credit rating (ICR) of
“a+” of Amlin AG, the FSR of “A+”
(Superior) and the ICR of “aa-” of
Lloyd’s Syndicate 2001, which is
managed by Amlin Underwriting
Limited, and the ICR of “a-” of
Amlin plc, the non-operating
holding company of the Amlin
group of companies. The outlook
for all ratings is stable.
•
Ratings agency AM Best has
affirmed the financial strength
AXIS-PARTNERRE DEAL CLEARED
BY EUROPEAN COMMISSION
Axis and PartnerRe have received all
competition-related approvals required
for the completion of their merger.
The transaction remains on track to
close in the third quarter of 2015,
subject to approvals by shareholders,
regulatory clearances and conditions.
News continued on page 11 
rating of “A” (Excellent) and the
issuer credit ratings of “a” of
Endurance Specialty Insurance
Ltd. and its subsidiaries. The
outlook for all ratings is stable.
www.jlt.com
| Plane Talking
11
 Continued from page 10
TORUS PARTNERS US MGA TO
WRITE GENERAL AVIATION
TOKIO MARINE TO ACQUIRE HCC
INSURANCE (HHC)
Torus announced that it has partnered
with Seattle-based managing general
agent (MGA) London Aviation
Underwriters (LAU) to write general
aviation (GA) business throughout the
US. Coverage will be written on behalf
of Torus National Insurance Company.
Tokio Marine Holdings announced that
it has agreed to buy US specialty
insurer HCC Insurance Holdings Inc.
(HHC) for USD7.5 billion, making the
acquisition the largest ever by a
Japanese insurer.
LAU has written GA throughout the US
since 1980 and specialises in airport
premises liability and non-owned
aircraft liability.
Torus said it is approved to write GA in
the majority of its targeted US states.
The process to have remaining target
states approved is under way, the
insurer added.
John Shettle, vice-chairman of Torus
and CEO of Torus US, said the
partnership will be a long-term
arrangement. “While Torus has been a
significant writer of aviation insurance
globally, we have not historically had a
significant GA presence in the US,” he
said.
EASA, IATA MOVE TO REDUCE RISK
OF LOSS OF CONTROL ACCIDENTS
The European Aviation Safety Agency
(EASA) and the International Air
Transport Association (IATA) has
announced new training requirements
for airline pilots to prevent loss of
control situations.
The “upset prevention and recovery
training” (UPRT) requirements aim to
improve safety standards by mitigating
loss of control in-flight (LOC-I)
accidents. The requirements based on
ICAO standards and practices have
been developed in consultation with
industry experts. All European airlines
and commercial business jet operators
are required to implement these
provisions by April 2016.
The transaction is expected to close in
the fourth quarter, subject to approval
by HCC’s shareholders and regulators.
US AVIATION AUTHORITY TO REVIEW
PILOTS' MENTAL HEALTH
SCREENING
The US Federal Aviation Administration
(FAA) said in a statement that it has
instructed its Pilot Fitness Aviation
Rulemaking Committee (ARC) to make
recommendations on how to better
screen the safety of pilots flying in
American airspace within the next six
months.
It said the study, which is to be
conducted by FAA officials and
representatives of the private aviation
industry, was aimed at finding more
effective ways of monitoring the mental
and emotional health of pilots.
The ARC, which according to the FAA
statement, is to include both American
and international "aviation industry
experts," is to be tasked with
examining not only the methods of
evaluating pilots' mental health, but
also barriers to reporting any
suspected issues. It will analyse the
findings of the study and will provide
recommendations within six months.
Based on the received
recommendations, the FAA may
consider changing policies and
procedures regarding pilot training and
testing, but also pilot medical
requirements as well as cockpit and
aircraft design, according to the
statement.
AVIATION ARRIVALS &
DEPARTURES
•
Mark Champion has left his
position in the Willis Aviation team.
•
Edward Louth has left his position
in the Marsh Aviation team to join
Antares.
•
Lee Gladden has left his position
at XL to join Mitsui.
•
Vanessa Powell has left her claims
position at Mitsui Sumitomo to join
Altitude Risk Partners.
•
Simon Tardif has left his position
at La Réunion Aérienne to join
Swiss Re Paris.
•
Mike Barrett, has left his claims
position at AIG to join the USAIG
team as Senior Vice President,
Claims Attorney.
•
Chris Hurdle has left his position
at Lockton to join Aon.
•
Philip Coldwell has resigned from
his position at AIG to join start-up,
Fidelis Insurance.
•
Ken Forsyth has joined Crawford
Global Technical Services (GTS)
as managing director Aviation the Americas.
•
Clyde & Co announced that Craig
Rooney, Fabrice Pradon, and
Trudy Seow, have been promoted
to Partner status.
•
Bob Duke has left his position at
GAB Robins.
12 AEROSPACE | Plane Talking | Q2 2015
IATA REVISES ITS 2015 INDUSTRY
OUTLOOK
The International Air Transport
Association (IATA) has raised its
forecast for 2015 industry profits by
more than 17% to USD29.3 billion,
almost double that seen last year.
Revenues in 2015 are expected at
USD727 billion, which would see the
industry achieve a 4% net profit
margin.
IATA said the significant strengthening
reflected the net impact of several
global factors, including stronger
global economic prospects, record
load factors, lower fuel prices, and a
major appreciation of the US dollar.
IATA had previously forecast a USD25
billion 2015 profit earlier in the year.
All regions are expected to see an
improvement in profitability in 2015
compared with 2014, but there are,
however, stark differences in regional
economies, which are also reflected in
airline performance, the industry body
cautioned.
Over half the global profit is expected
to be generated by airlines based in
North America, more than double that
of the next best performing regions of
Europe and Asia-Pacific.
“For the airline business, 2015 is
turning out to be a positive year. Since
the tragic events of September 2001,
the global airline industry has
transformed itself with major gains in
efficiency. This is clearly evident in the
expected record high passenger load
factor of 80.2% for this year. The result
is a hard-earned 4% average net profit
margin. On average, airlines will retain
USD8.27 for every passenger carried,”
said Tony Tyler, IATA’s Director General
and CEO.
ACE TO BUY CHUBB
ACE is set to buy insurer Chubb for
USD28.3bn. The deal will see ACE
shareholders own 70% of the
combined company, with Chubb
shareholders owning 30%. The
Chubb brand set to be kept and the
deal is set to be completed by the first
quarter of 2016.
JLT AEROSPACE MAKE NEW
APPOINTMENTS
JLT are pleased to announce the
following new recruits will join our
Aerospace team at various dates
during the coming months after
serving their respective contractual
notice periods:
Stuart Nelson joins us from Willis
Aerospace where he was Head of
Contract Advisory (Wordings). Stuart
will perform a similar role as a Partner
at JLT, working closely with our
existing team to develop our wordings
capability.
Andy Barker will join our Aerospace
claims team as a Partner, providing
added strength and depth to our
existing claims capability. Andy joins us
from Allianz where he was a Senior
Aviation Claims Expert.
JLT AEROSPACE TRAINING
SEMINAR 2015
JLT held its 8th annual Aerospace
Insurance Training Seminar in London
from 15 to 18 June 2015.
Having now run the seminar for some
time now, we know that delegates
learn a great deal that is applied when
they return to their day-to-day roles,
helping increase the level of insurance
knowledge in their companies. We feel
that educating our clients and partners
is an important part of our role.
This year’s seminar was attended by
over 40 delegates from different
countries around the world.
The seminar covered all aspects of
Aviation Insurance with quality
speakers from all disciplines of the
market, complimented by many
professional presentations made by
members of the JLT team.
Seminar attendees not only benefit
from the knowledge they gain from the
course itself, but also from
opportunities to network with a range
of people who work in the London
aviation insurance market, which can
prove a significant benefit.
Ben Spain joins us from Global
Aerospace where he worked as a
Space Underwriter. Ben’s primary
focus at JLT will be as an Associate
within our space team, in addition to
providing business analyst support in
other areas.
Importantly time was still found for
social events which helped make this
year’s Seminar both rewarding and
fun. The highlight of this year’s event
being a trip to Duxford Aerodrome,
complete with a unique flypast of the
Grace Spitfire, a wonderful piece of
Aviation history.
JLT ranks amongst the very best
resourced brokers in the aviation
sector and these latest recruits reflect
our ongoing commitment to providing
the highest quality of service to our
clients.
We would like to take this opportunity
to thank all of the delegates that
attended and to thank all our
instructors and speakers that
contributed and helped to make the
seminar such a great success.
We look forward to next year’s event.
www.jlt.com
PARIS AIR SHOW 2015
The 51st Paris Air Show took place at
Le Bourget Airport from 15 to 21 June.
This event, over a hundred years old, is
the largest and longest-running
aerospace trade show in the world.
This year some 351,000 people from
the aerospace industry and the general
public were present, an 11% increase
on the attendance in 2013.
One of the main talking points of any of
the big industry Air Shows is who will
get the most aircraft orders, Airbus or
Boeing?
At the last show in 2013, Airbus
notched 466 commitments, including
some finalisation announcements
valued at USD68.7 billion. Boeing
wasn’t far behind, winning 442
commitments at a value of about
USD66 billion.
This year, Airbus racked up USD57
billion worth of business for 421
aircraft. The announcement of a late
deal with European low-cost carrier
Wizz Air for 110 A321neos, worth
more than USD12.5 billion at list prices
put the France-based manufacturer
ahead of rival Boeing in financial terms.
It was the show's single biggest order.
Boeing recorded orders and
commitments for 331 planes worth
USD50.2 billion. Its biggest deal was
with Dutch leasing company AerCap
for 100 737MAX-8 aircraft, worth up to
USD10.7 billion at list prices.
Total orders and commitments
amounted to USD107.2 billion of new
business for the two companies. This
total was USD8.3 million down on the
value of deals secured by Airbus and
Boeing at last year’s Farnborough Air
Show. However the number of aircraft
ordered was higher, with 752 this year
compared with 697.
| Plane Talking
13
In the regional sector, Bombardier
would have been hoping for some
orders after showing off its new
CSeries aircraft for the first time, but
none came. Bombardier announced
only one new firm order during the
show, selling six Q400 turboprops to
Canada's WestJet Airlines.
Meanwhile, Bombardier’s rival in the
regional jet arena, Brazil’s Embraer
announced USD2.6 billion in deals,
including orders for its new revamped
E1 and E2 regional jets.
THE 5 LARGEST
COMMERCIAL AIRCRAFT
ORDERS BY CUSTOMER
(INC. OPTIONS)
•
order for 110 Airbus A321neo
aircraft worth USD13.7 billion at
list prices. The order also includes
purchase rights for a further 90
aircraft.
•
Korean Air placed orders for a
total of 50 737 MAX-8 (30 firm, 20
Regional manufacturer ATR faired well
announcing 46 firm orders and 35
options worth a combined total of
around USD1.98 billion. ATR has now
exceeded 1,500 firm orders since the
beginning of its turboprop programme.
Asia was the most active region,
accounting for around half the total
airline commitments during the show.
This was followed by the Middle East
and South America.
Wizz Air placed the shows biggest
options) and two 777-300ER jets
from Boeing and 50 A321neo
aircraft (30 firm, 20 options) from
Airbus. The deals are valued at
approximately USD12.2 billion
•
AerCap, the aircraft lessor, placed
an order for 100 Boeing 737
MAX-8 aircraft valued at around
USD10.7 billion at list prices.
•
Garuda Indonesia signed letters of
intent with Boeing for 30 787-9s
Whilst much of the Paris Air Show is
dominated by the commercial sector,
its military sector is considered an
important part of the event.
and up to 30 737 MAX-8s, and
with Airbus for 30 A350 XWB, a
deal which together is worth
almost USD20 billion at list prices.
This year, Dassault's Rafale jet fighter
wowed the crowds with an acrobatic
display. The Airbus A400M also made
a surprise appearance, after one
crashed in May whilst on a test flight.
This time round, the aircraft displayed
its capabilities with an impressive
demonstration.
A number of other innovations and
concepts were also announced during
the show including Airbus’ planned X6
heavy-lift helicopter, Textron’s Scorpion
fighter jet, new drone/UAV systems,
and various satellite and software
technology solutions
•
Synergy Group signed a letter of
intent for 62 Airbus A320neo
aircraft for its Avianca Brazil unit.
WHO WON THE ORDER
BATTLE?
•
Airbus triumphed with USD57bn
worth of orders and commitments
for 421 aircraft,
•
This was slightly ahead of Boeing
who agreed orders and
commitments for 331 planes with
a value of just over USD50bn.
JLT Specialty Limited provides insurance
14 AEROSPACE | PLANE TALKING | Q2 2015
broking, risk management and claims
consulting services to large and
international companies. Our success
comes from focusing on sectors where we
know we can make the greatest difference
– using insight, intelligence and imagination
to provide expert advice and robust - often
unique - solutions. We build partner teams
to work side-by-side with you, our network
and the market to deliver responses which
are carefully considered from all angles.
CONTACTS
SUBSCRIPTIONS & GENERAL QUERIES
[email protected]
EDITORIAL TEAM
Richard Adams
Aerospace, JLT Specialty Limited
+44 (0) 207 466 5220
[email protected]
Brad Hills
Aerospace, JLT Specialty Limited
+44 (0) 207 466 1434
[email protected]
BUSINESS CONTACTS
Nigel Weyman
Aerospace, JLT Specialty Limited
+44 (0) 207 466 1448
[email protected]
William Smith
Aerospace, JLT Specialty Limited
+44 (0) 207 466 6654
[email protected]
LET US KNOW WHAT YOU THINK
JLT is always looking to improve the services and information we provide to our
readers. We value your opinion and welcome your feedback on our Plane Talking
publication. Should you have any feedback please contact us at:
[email protected]
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Conduct Authority. A member of the Jardine Lloyd
Thompson Group. Registered Office: The St Botolph
Building, 138 Houndsditch, London EC3A 7AW.
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© June 2015
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