Transcript Lan Chile Post renewal report 17th November 2002

November 2006
Aviation Insurance Market Which Way Forward?
Charles.J.B. Searle
Act I - Setting the scene
abduction, seduction and destruction
Marsh Ltd
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The historic market cycle
Hard and Soft Market
Premium
AFV
4,000
700,000
Hard Market
Hard Market
Hard Market
3,500
600,000
Soft Market
Soft Market
Soft Market
2,500
400,000
2,000
300,000
1,500
Estimated World AFV US$millions
500,000
200,000
1,000
100,000
500
Marsh Ltd
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05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
0
19
86
0
19
85
Net Airline Premium US$ millions
3,000
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Act II - The current market
environment
A tragedy in waiting ?
Marsh Ltd
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Historical Airline Premium & Claims
1995 to 2005 to date
5,000.0
Hull
Liability
Attritional
Premium
4,500.0
4,000.0
3,500.0
3,000.0
2,500.0
2,000.0
$865m estimated margin
before year becomes a loss
1,500.0
1,000.0
500.0
0.0
1995
1996
1997
Including estimated attritional losses
Marsh Ltd
1998
1999
2000
2001
2002
2003
2004
2005
Est 2006
5
2006 - Airline Capacity
(Non - US major airline - based on US$1.5 billion)
New Capacity :
French:
LRA
AXA
10.00%
5.00%
Rest of World:
Al Khazna
Alliance Re
ADNIC
Aviabel
AXIS
Converium
Delvag
GIC
Glacier Re
Interhannover
Kric
Misr
Munich Re
Nissay
Partner Re
QIC
Sirius White Mountain
Swiss Re
Tokio
0.15%
0.50%
0.25%
1.00%
5.00%
2.00%
0.50%
5.00%
2.50%
4.00%
3.00%
0.50%
10.00%
0.20%
3.50%
1.25%
2.50%
12.50%
1.50%
Marsh Ltd
French
15.00%
New Capacity
27.50%
Berkley Aviation
Dong Bu
Inter Aero
LIG
Max Re
QBE Limit
Starr Aviation
3.00%
1.00%
5.00%
2.50%
3.50%
5.00%
7.50%
Lloyd’s:
Lloyds
37.75%
ROW
54.85%
ACE
Amlin
Atrium
Catlin
Faraday
Kiln
St Paul
Wellington
XL
10.00%
5.00%
2.00%
2.00%
4.00%
2.00%
2.75%
5.00%
5.00%
London
40.00%
London:
Total Competitive Capacity: 175.10%
Allianz
Aspen
Wurtt
Generali
AIG
Global
Liberty Mutual
10.00%
2.50%
1.50%
1.00%
10.00%
12.50%
2.50%
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Rating Indexes
Net RPK Rate
Avg Mkr Hull Rate
0.2000%
0.9000
0.1800%
0.8000
0.1600%
0.7000
0.1400%
0.6000
0.1200%
0.5000
0.1000%
Hull rates are at the
same level as in 2000
0.0800%
0.4000
0.3000
0.0600%
RPK rates are still 100%
higher than pre 9/11
0.2000
0.0400%
0.1000
0.0200%
0.0000
0.0000%
2000
2001
Marsh Ltd
2002
2003
2004
2005 2006
2000
2001
2002
2003
2004
2005 2006
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Manufacturers
Net Liability Premium Vs Liability Claims
10 Year Summary (1996 - 2005)
Total premium
Total Claims
US$6,381m
US$4,930m
Manufacturers
Profit/Loss
US$1,451m
Millions
$1,200
Manufacturers Premium
Manufacturers Claims
$1,000
$800
Annual Average Premium US$638m
$600
Annual Average Claims US$493m
$400
$200
$0
1996
1997
1998
1999
2000
2001
2002
Claims figures do not include IBNR nor have they been adjusted for inflated
Marsh Ltd
2003
2004
2005
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Manufacturers Comparison of Loss Reserves
2003, 2004 Vs 2005
Million ($)
$1,711 million deterioration
800
Losses Valued at 31st Dec 2003
Losses Valued at 31st Dec 04
Losses Valued at 31st Dec 05
$690 $700
700
600
$540
$535
$514
$500
$550
$530
$550
$480
500
$425
$410
$400
400
$300
$282
300
$267
$245
$250
$300
$250
$200
$200 $200
$200
200
100
0
1997
%/ $ Inc. 118.4%
in Reserves $290m
Marsh Ltd
1998
1999
2000
2001
2002
2003
2004
35.0%
$140m
87.9%
$248m
106.0%
$283m
180.0%
$450m
120.0%
$300m
0.0%
$0m
0.0%
$0m
2005 - Est
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2006 - Manufacturers Capacity
(Non - US manufacturer - based on US$1.0 billion)
French:
AXA
LRA
5.00%
2.00%
3.00%
3.00%
10.00%
2.00%
12.50%
Max Re
QBE Limit
Starr Aviation
French
13.50%
Rest of World:
AXIS
Converium
Glacier Re
Interhannover
Munich Re
Partner Re
Swiss Re
New Capacity :
6.00%
7.50%
New Capacity
17.50%
ROW
37.50%
Lloyd’s:
Lloyds
55.00%
London
51.00%
London:
AIG
Allianz
Aspen
Generali
Global
Wurtt
Marsh Ltd
2.50%
5.00%
10.00%
ACE
Amlin
Catlin
Faraday
Kiln
St Paul
Wellington
XL
15.00%
5.00%
5.00%
7.50%
2.50%
2.50%
12.50%
5.00%
10.00%
15.00%
5.00%
1.00%
17.50%
2.50%
Total Maximum Capacity: 174.50 %
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Tied up in red tape
+
=
Marsh Ltd
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2006 - Airline Excess AVN52 Capacity
(Non - US major airline - based on US$1 billion)
Lloyd’s:
USA:
Berkshire Hathaway
(via Global)
100.00%
USA
100.00%
Lloyds
42.05%
Rest of World:
AXIS
Glacier Re
Interhannover
Kric
Lancashire
Swiss
Tokio
Wurt
30.00%
4.00%
15.00%
3.00%
25.00%
20.00%
2.00%
2.00%
ROW
101.00%
London
37.50%
ACE
Aegis
Amlin
Atrium
Brit
Catlin
CV Starr [1]
Faraday
Hiscox
Kiln
Liberty Syndicates
MAP 2791
PW Hardy
Reith
St Paul
Talbot
Watkins
Wellington
XL
5.00%
0.50%
2.00%
1.50%
4.00%
4.50%
7.50%
2.50%
1.50%
0.30%
2.00%
1.50%
0.50%
1.50%
1.00%
1.50%
1.00%
1.75%
2.00%
London:
AIG
Allianz
Aspen
Liberty Mutual
25.00%
10.00%
2.00%
0.50%
[1] CV Starr to begin writing from 1/11
Marsh Ltd
Total Capacity: 277.55%
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Third Party War Liability
Rating History
Initial $1.25 Surcharge
+ Additional for $1bn limit
Development Ratio
Using 2001 as base year 1.00
1.00
0.90
0.80
Surcharge rolled in at discount
+ Additional for $1bn limit
0.70
0.60
0.50
Additional capacity drives
rates down
0.40
0.30
0.20
0.10
0.00
2001
2002
Rate Development
2003
2004
2005
Marsh Ltd
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Act III - Which way forward
Will the market go astray?
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Landing and take off
?
2007
Marsh Ltd
2008
2009
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A380 – too large to insure?
The introduction of the
Airbus A380 in 2007 will
mean a large increase in
exposures to airlines and
airports.
The A380 will have an
average seating of around
550, with a potential
maximum (restricted to
certain specific regions) of
990.
1,200
1,000
800
600
400
200
0
Marsh Ltd
Max. Capacity
Potential Maximum
Now B747-400D
Future A380
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Combined Single Liability Limit
Looking at 60 of the major international airlines worldwide we can
see that the majority buy $1.5 billion or above.
# of Airlines
9
1.00 billion
1.15 billion
1
1.20 billion
1
6
1.25 billion
1.35 billion
1
25
1.50 billion
3
1.75 billion
11
2.00 billon
2.25 billion
Marsh Ltd
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The tip of the iceberg
Insured
Uninsured
Are too few of the risks of
the aviation industry
insured in the Aviation Market?
Marsh Ltd
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Surviving the test of time
Marsh Ltd
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Marsh Ltd
Aviation and Aerospace Practice
Tower Place
London EC3R 5BU
Tel: 020 7357 1000
Fax: 020 7929 2705
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance
information only. Marsh makes no representations or warranties, expressed or implied, concerning the accuracy of information contained herein or
the financial condition, solvency, or application of policy wordings of insurers or reinsurers. The information is not intended to be taken as advice
with respect to any individual situation and cannot be relied upon as such. Insureds should consult their insurance and legal advisors with respect
to individual coverage issues.
This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Marsh Ltd,
except that clients of Marsh Ltd need not obtain such permission when using this report for their internal purposes.
© Copyright 2006 Marsh Ltd All rights reserved.
Marsh Ltd is a authorised and regulated by the Financial Services Authority
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