Page 35 - WTW Asia Insurance Market Report
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Rates fell across most aviation products in 2016. Major         Hull war - Increased global political unrest and terrorist
airlines received rate reductions of up to 10%. With a high     threat has not affected the Hull War market. Large
Combined Single Limit (CSL) (USD 2 billion) and high aircraft   additional premiums are charged for flights into “conflict
value (approximately USD 275 million), significant capacity     areas” or “hot-spots”. Despite Hull War losses in 2015,
is required to complete the risk at competitive terms. Low      the market in 2016 has been relatively stable. Renewals
Cost Carriers (LCCs) received up to 25% rate reductions,        are being treated on a case by case basis, and a 10%
more so after July 2016. With a CSL of less than USD 1          reduction will be the most an airline can get if it has had no
billion and an aircraft value of approximately USD 50 million,  losses and decent growth, making it hard to establish a
significant capacity is available to complete the risk at more  common trend.
competitive terms than the major flag carriers.
Despite volatility and marginal profitability, additional
capacity continues to be attracted to the sector. Fidelis       Launch - Ariane 5 rates were the most competitive in the
began operations at the end of 2015 with capacity of up to      market. Proton premium rates were significantly higher
USD 15 million on any one risk, ElseCo continue to expand       than other launch vehicles due to poor loss experience,
with overall maximum capacity of over USD 150 million,          quality control and reliability over the last 5 years.
LRS and XL Catlin are writing in-orbit business again after     Several other vehicles such as Atlas V, H-IIA (H-IIB) and
substantial periods of inactivity and Chinese markets are       Long March 3BE remain popular with insurers but have
offering ever-increasing capacity on programmes utilising       presented limited commercial opportunities to date.
Sino hardware (DFH-4 satellites/LM launch vehicles).            Insurers now have an increasing appetite for other smaller
Insurance for Non-Proton risks is expected to become            and emerging launch vehicles such as Dnepr, PSLV, Rokot,
more competitive as insurers look to secure additional          and Vega. There is ample capacity even for dual launches
premium income on these risks. Rates and premiums are           with large sums insured.
expected to decrease even further in 2017.
                                                                In-Orbit - Rates continued to decrease during the first half
Aviation:                                                       of 2016, with standard “western built” communications
                                                                satellite rates at a historical low (0.375% - 0.425% for
Hull And Liability - Premiums fell an average of 10% from       straightforward payloads, 0.50% - 0.60% for bigger more
January 2016, with a 9% decrease in Q3. The Average             complicated spacecraft). Average reductions are now 5%
Fleet Value (AFV) rose by 7% from the start of the year.        to 10%, compared to 10% to 15% in 2015. Premiums are
The impact of losses is short-lived and has no impact           now so low that many underwriters consider them to be
on rates at the time of policy renewal. Airlines with high      at minimum levels already and further reductions are not
growth potential and low attritional losses are offered         economic. Russian- built spacecraft continue to command
extremely low premium rates.                                    substantially higher rates, stemming from the Egyptsat 2
                                                                USD 75.5 million Total Loss and Amos-5, a potential Total
Significant losses:                                             Loss of USD 158.5 million.

Loss of USD      Loss of USD      Loss of USD                   Satellite Platform - With a limited number of commercially
61 million       30 million       15 million and                insured GEO satellites and LEO imaging satellites in
                                  USD 18 million                any given year, insurers are broadening their portfolios
The nose         Asiana Airlines  respectively                  by offering coverage for the new generation of LEO
wheel of a       was damaged                                    constellation satellites. Designing coverage for these
UPS freighter    while being      Collision of                  constellations can be complex. Insurers are able to balance
collapsed after  towed out        Batik Air and                 their portfolios by offering smaller capacity.
a failed take    of a hangar      TransNusa Air
off in Seoul     at Incheon

                                                                35Asia Insurance Market Report 2016
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