By Peter Ireland, Marsh Canada Ltd.
The terrorist incidents on Sept. 11, 2001, had a major impact
on the aviation insurance industry. It had to act in response to the events to
ensure that the industry could pay the very large claims expected and maintain
its capability to provide insurance coverage in the future.
For 2001, rates have on average increased +50.6% (hulls) and +46.3% (liability)
resulting in an overall net premium increase, of 45.8% .
For the year 2002 so far, increases appear to be sustained at slightly lower
levels than seen in the 4th Quarter of 2001. For the year to date Hull Rates
have increased by an average of +50.9% and Liability Rates by +48.7%. Net
Premium is currently 69.1 % higher than for the same renewals in 2001.
HARDENING MARKET
If we are to believe that we are about to enter a harder market environment,
then we can expect underwriters to look to increase the rating differentials
between good and bad. For instance, airlines who have continued to produce
underwriting profits through the late nineties should expect to achieve better
treatment than those airlines that have produced the losses.
However, insurers are looking more and more at the cause of the losses and are
increasingly interested in the measures taken by their clients to avoid losses.
Underwriters are requesting more information concerning the resources,
operational and management structure of each airline together with details of
training, maintenance, CRM (Crew Resource Management) and other aspects
affecting overall safety of the airline. We can expect underwriters to become
more pro-active in understanding the airline’s risk by way of visits to both
headquarters and operational sites.
HOW DOES THIS AFFECT THE COPA PROGRAM?
The same Underwriting attitude prevails with General Aviation Underwriters
who write Commercial Operators, Industrial Aid Aircraft and Private Aircraft
Owners.
The vast majority of Underwriters, if not all, are increasing rates, reducing
Liability Limits, increasing deductibles, restricting coverage and ceasing to
undertake certain categories of aircraft and exposures. This is a “hard market”.
This is what happens when the aviation insurance underwriters are experiencing
tough times. Prior to this environment we had what is known as a “soft market’
which allowed greater flexibility in rating and coverage. Consequently, this
makes a much more challenging environment in which we as your Insurance
Administrator work. Particularly when you consider with respect to Private
Aircraft there is only a handful of Underwriters who write this type of business
to begin with.
Bearing the foregoing in mind for the year 2001 the COPA Insurance Program
incurred an increase in rates. For 2002, the COPA Insurance Program was also
facing a rate/premium increase.
Consequently, it was incumbent upon us, the COPA Insurance Administrator, to
seek out competitive terms from alternate insurers to ensure COPA members got
the best deal.
Neither COPA nor us as the Insurance Administrator wanted to switch insurance
carriers as the incumbent insurer was one of the world’s leading insurance
companies and the long term relationship was not one which COPA wanted to sever.
However, the terms that we were able to negotiate with the Try-Baltica (
Co-Operators General Insurance Company ) were just too competitive to ignore. As
most of you know the rates being enjoyed under the 2002 program in most
instances are considerably more attractive than those enjoyed under the 2001
program. The Tryg-Baltica being one of the largest European underwriters of
General Aviation business (excluding airlines) along with an already profitable
portfolio was one of the contributing factors in their ability to be so
competitive.
POLICY WORDING
For proprietary reasons we had to negotiate a new policy wording for both
the Silver and Gold Wings Plans. The process is not quite as simple as you might
think. It requires the services of a lawyer, in Toronto, our own in-house
wordings expert, in Calgary plus the Underwriter’s own wordings specialist who
is located in London, England. For a myriad of reasons it has taken 5 months to
get final agreement on the Silver Wings wording. As of May 15th, we started to
send out policies for the Silver Wings Plan. We attacked the issues of the
Silver Wings policy first as this plan has the greatest number of insured.
The Gold Wings policy wording is in its final stage of negotiation and it is
expected we should be in a position to start issuing policy documentation by the
time you read this.
COMMUNICATIONS
Because of the success of the program this year our telephones have been
ringing off the hook. To date we have bound coverage for almost the same number
of clients as we did for the entire year of 2001.
And we have had a large number of people call our dedicated Silver Wings line
for a Gold Wings quotation. Effective July 1st, this dedicated # 1-800-361-1625
will contain a message, Press 1 for Silver Wings or Press 2 for Gold Wings. We
also have a dedicated Gold Wings # 1-800-996-0995.
If you cannot get through to us by phone then send us an e-mail or fax. You can
also access us via our web site www.marsh.ca. Once at the site click on
Insurance Products then click on Associations. From there you will be directed
to the COPA section of our web site and be able to contact us.
The COPA insurance program attempts to provide competitive and comprehensive
coverage for the COPA membership. There are so many different types of risks and
exposures, special requests and needs out there, however, not all can be
satisfied under the program. The vast majority are satisfied as evidenced by
this years increased participation. Once the first year is completed i.e.
December 31st 2002, depending on the claims experience of the insurer we may be
in a better position to expand the program to accommodate some of those
individuals who cannot presently be insured under it.
CLAIMS
One final item is all claims are handled by an independent adjusting firm,
Airclaims in Montreal. All claims must be reported to them. Although they are in
Montreal they have correspondents in all parts of Canada/US hence there is not a
problem handling a claim anywhere in Canada/US. When a claim is received by
Airclaims their responsibility to gather all of the pertinent information,
submit their findings to Tryg and seek approval of the claim. When this is done
the insured is asked to sign a Proof of Loss, in the case of a Hull claim. Once
this is accomplished the claim will be paid. In order to speed up the process
Underwriters have deposited with Airclaims $100,000, In Trust. This is known as
a revolving fund. Once Airclaims receives approval to process the claim from
Underwriters they are authorized to pay the claim from the fund.