Page 0 RAAKS Conference 2015

AIRLINE INSURANCE

MARKET UPDATE

Alex Chapman

March 2015

Page 1 RAAKS Conference 2015

Airline Market Drivers - Capacity

Total Capacity 217.35%

Non-US CSL US$2bn & MHV US$250m

Capacity

67.40%

Europe

81.75%

Lloyd’s

London

37.50%

30.70%

Intn’l

• Abundant Capacity

− New Entrants adding competition

• Diversity of Insurer Portfolios

− Aerospace remains attractive

• Predictable Catastrophe Sector

− Improving record safety record

Aerospace remains a high profile

sector that is attractive for insurers

Page 2 RAAKS Conference 2015

Airline Market Drivers – Claims

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

US

$ (

Millio

ns)

January - DecJanuary - Dec January - Dec January - Dec January - Dec

2010 2011 2012 2013

5 Year Average US$1.44bn

2014

Hull: $407.97

Liability: $790.79

Attritional: $465.00

Total to date: $1,663.76

Page 3 RAAKS Conference 2015

2014 World Airline Safety Trends

Source: IATA, ‘2014 Safety as at 30th September only (full report due April 2015)

Number of Western built Jet accidents per million sectors

0,00 0,25 0,50 0,75 1,00

M. East & N. Africa

Latin America

Asia Pacifc

Europe

North America

CIS

North Asia

Africa

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

2009 2010 2011 2012 2013 2014

Industry

IATA Members

“2014 will see an improvement in the worlds commercial aviation safety

performance”

Capt Kevin Hiatt, Safety & Flight Ops IATA

− This is impressive considering exposure growth

Page 4 RAAKS Conference 2015

Global Airline Consolidation

• Fewer Larger Programmes

• Economies of Scale

• Younger Fleets

• Improved Risk Profile

Page 5 RAAKS Conference 2015

Airline Hull & Liability

2014 Net % Premium Movements

Yearly Average +1.5%

January is an anomaly

due to the small number

of renewals

18.2%

-20.9%

-11.8%

-5.1%

-17.3%

-8.2%-10.2%

-2.8%

21.9%

19.7%

5.6%7.1%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14

Yearly Average +3%

Page 6 RAAKS Conference 2015

A Divided Market

Total Capacity 217.35%

Non-US CSL US$2bn & MHV US$250m

Capacity

67.40%

Europe

81.75%

Lloyd’s

London

37.50%

30.70%

Intn’lMAS Participation

Exposed

Not

Exposed

Market Capacity

Exposure to MH370/017

Page 7 RAAKS Conference 2015

‘The Miss Factor’

Airline A Airline B Airline C Airline D Airline E Airline F

Market A

Market B

Market C

Market D

Market E

Market F

Market G

Market H

Market I

Market J

Market K

Market L

Market M

Market N

Market O

Market P

Market Q

Market R

Market S

Market T

Market U

Market V

Market W

Market X

Market Y

Market Z

Page 8 RAAKS Conference 2015

1,00

1,25

1,50

1,75

2,00

2,25

2,50

2,75

3,00

3,25

3,50

3,75

$700

$750

$800

$850

$900

$950

$1 000

2009 2010 2011 2012 2013 2014

PA

X &

Pre

miu

m U

S$

bill

ion

Миллиарды

AF

V U

S$

bill

ion

Миллиарды AFV

PAX

Premium

Airline Insurance: Risk Values & Premium

• Cost of claims

– Increasing?

Source: Willis Data

Page 9 RAAKS Conference 2015

Attack on Tripoli

Page 10 RAAKS Conference 2015

Hull War Market - Impact of Major Events

• Traditionally reactive market

• Est. 2013 annual premium - $60m

• 2014 Market Premium - $95m

• Average Rate Change - 16%

• Estimated annual losses

– >US$563m

Malaysia Airlines US$151m

Tripoli >US$400m

Iraqi, PIA US$12m

• Greater scrutiny of risk in general due

to rise in terrorist threat.

0%

100%

200%

300%

400%

500%

600%

700%

$0

$100

$200

$300

$400

$500

$600

2012 2013 2014

Lo

ss R

atio

%

Pre

miu

m / C

laim

s U

S$

(M

illio

ns)

Premium

Claims

Loss Ratio

Hull War Risks

Page 11 RAAKS Conference 2015

Will Aviation be Driven by External Factors?