Widespread inflationary pressures, along with other stress factors such as geopolitical risks, are causing ongoing challenges for most general aviation operators and insurers, global broker Marsh says in an update on the London market. 

High inflation is impacting operating costs for insureds across the aviation industry, adversely affecting the value of attritional losses, according to the update prepared by Marsh Specialty UK. 

“Claims inflation can heavily influence insurers’ attritional loss ratios and increase cost of business,” the update says. 

The ongoing Russia-Ukraine war is another factor that is influencing market conditions. The update says losses emanating from the conflict remain somewhat unresolved, and therefore, uncertainty remains in the market. 

At the same time the uncertain economic outlook in the wider financial markets is also a factor to consider, as a volatile environment can impact market capacity. 

The update – Aviation insurance market overview – says reinsurance costs continue to increase, fuelled by the retrocession market. 

Marsh says the retrocession insurance market that reinsures the reinsurance market has significantly reduced available capacity, thereby restricting the appetite and flexibility of several aviation reinsurers. 

On the upside, increased costs have not dented the direct market’s appetite for business. Marsh says it continues to see from the direct market “a desire to increase market share, leading to greater competition”. 

“Broadly, in Q3, capacity continues to grow in the general aviation market, with line sizes increasing and the addition of new entrants, creating a downward pressure on rates. 

“Increased capacity could continue counteracting the reinsurance costs faced by insurers as treaty renewals begin to take place.” 

Click here to access the report.