The air transport industry is currently facing the worst crisis ever: passenger numbers are down by more than 60 % and nearly a quarter of the world’s aircraft fleet remains on the ground. Apart from a few exceptions, the whole value chain is impacted: manufacturers and airports see a double-digit drop in their activity alike.
In the face of the crisis which is hitting our insureds particularly hard, REUNION AERIENNE & SPATIALE adapted its underwriting swiftly.
First of all, we responded positively to the requests for extension of payment deadlines and for premium instalments. Then, we anticipated their adjustment, in proportion to the parameter changes, as provided for by the contracts in the vast majority of cases.
Whilst readjusting our business plan, we enhanced our underwriting discipline accordingly, in particular, our risk analysis methods and our pricing tools; again with the goal of returning to profitability in 2021 like all the other players in the market.
According to one of our ” 10 commandments ” for underwriting, we use systematically the pricing models developed with the help of our actuaries going forward. For the Airlines segment, for instance, we take into account each insured’s frequency claims along with an allocation of the large market claims in proportion to the limits and/or exposures. We are also finalizing our models for the aerospace and general aviation businesses.
In addition, we have started using a qualitative as well as a quantitative scoring method to determine our maximum share.
Our aviation risk analysis also benefits from the introduction of our « business intelligence », which cross-references our internal data with industry data, building upon a proven track record in our space business.
In the same context, we review the limits, the scope or the restrictions of cover on a systematic basis, especially those related to groundings, financial losses, as well as cyber and pandemic risks.
Finally, whilst driving our technical underwriting through the Covid-19 crisis in a pragmatic way, we continue to develop commercial relationships and to target several lead accounts, with a renewed quality of service, thanks to the unwavering engagement of our strengthened teams.
Chief Underwriting Officer
Jean-Claude GÈZE, Chief Underwriting Officer
|Our Capacity||Our Shares|
$300 M USD
Up to 13%
$250 M USD
Up to 20%
$250 M USD
Up to 10%
Up to 100%
Up to 30%
$150 M USD
Up to 100%
$30 M USD
Per Launch / satellite
$10 M USD
REUNION AERIENNE & SPATIALE writes business on behalf of its principals in most countries and territories subject to local laws and regulations, in accordance with country specific sanctions.
At LA REUNION AERIENNE we feel that it is important to offer our brokers and clients alike access to underwriting solutions from both the Paris and London platforms. To this end, we have added even more capability and experience in hiring new individuals in our London office.
We are full members of the International Underwriting Association in London. We also have a prominent position with the International Union of Aviation Insurers to participate in and influence market forums in our position as a significant organisation within the Aviation underwriting community.
From these platforms we are more than ever a powerful voice in the market when issues arise, solutions are required, and opinions sought for the functioning of the marketplace to the ultimate benefit of all parties.
Chief Business Development Officer
2021 stands for a change of paradigm in the Airlines market. 2020 was to bring us a basis to restore our fundamentals and build back our capacity to respond to client needs as well as the confidence of our shareholders/principals in our market. Instead, a once in a lifetime event has severely impacted the world and most of our airlines’ clients. We believe that facing a major challenge might also be an opportunity to reinvent us and to become stronger and sharper in order to take advantage of the new incoming cycle.
The airline industry has to rebuild its capabilities and the financial consequences once the subsidies cease are yet to be assessed. Additionally, since such a disaster was not anticipated, issues arising from it such as ground accumulation, increases in airline incident frequency, crew skills proficiency issues as well as aircraft valuation and maintenance problems in these particular conditions.
In 2020, LRA has made the best use of the lockdown in building new tools to pursue our everlasting efforts to perform.
We have launched an innovative “pricing tool”, which values our product by using either the claims experience of a given Insured or the required premium based on exposures and contribution to the funding of claims. This tool further enhances our measurement of the risk.
In addition, it allows us more time to take a macro view to better anticipate, through a reinforced aviation culture, the trends we are perceiving in the Insured’s statistics, whilst analysing their data or meeting with them at their station/facilities (hopefully in 2021!)
We are also implementing a system that maximizes the use of our capacity and optimises our share. It combines quantitative (claims frequency and severity) and qualitative (risk assessment) criteria.
Lastly, we continue to develop our integrated business intelligence system using “big data” and merging our data with external media. This allows us to track down risk location and accumulation, risk planning, etc.
We will then be part of the new Aviation Safety paradigm, being more pro-active rather than reactive even if, ultimately, predictability seems to be the unreachable new frontier, at least for now.
Chief Airlines Underwriter
Ludovic BERLIOUX, Airlines Senior Underwriter
Christopher HESKETH, Airlines Senior Underwriter
+44 207 265 63 53 Mobile:+44 7496 572721
Unprecedented was the word of 2020 with almost every situation bringing the market unforeseen and unexpected challenges.
However, what wasn’t new was an underperforming market and premium inadequacy for the claims being paid. The aviation market had begun to move slowly upwards with the well-used excuse that a seismic shift would attract an influx of capacity and destroy the market dynamics. The losses though keep coming and the move towards profitability will require increased momentum.
Our clients meanwhile are suffering due to the Pandemic but (with a few exceptions) still manage to deliver profitability to their shareholders which is a privilege that underwriters have rarely managed in recent years.
The quantitative value of claims is a concern too with the 2018 underwriting year delivering to Aerospace underwriters loss ratios far in excess of anything seen before. Due to the long-tail nature of our product, underwriters are often seeing a deterioration in older years which exceeds the current annual premium. The situation is becoming (or is already) critical.
Underwriters have responded to clients’ plea for differentiation and everyone is judged on their own merits but within the premium calculation, the market participation allocation seems to have been missed. The well-worn statement that the losses of the few are paid for by the many remains a core principle but when Underwriters reach for that sum, the cupboard is bare.
With a number of our large clients being well capitalised the challenge for underwriters is to maintain relevance to those entities who could easily absorb our product into their captives. The breadth of coverage and cost has to be attractive and economically efficient- which it clearly is at present as these companies are still buying traditional insurance.
The simple response is to charge more premium, but the answer for our major clients may be to restructure the placement and provide coverage that is more cost-effective than keeping it “in house” and will provide profitability to underwriters.
The challenges have been set by capital providers, brokers and clients and with the experience and ability that LRA has brought to the market over many years, we are confident that we will move into 2021 with enthusiasm, empathy and strong underwriting which will contribute to a brighter future.
Chief Aerospace Underwriter
Graham DALDRY, Chief Aerospace Underwriter
+44 207 265 6136 / +44 75 38 94 42 22
2020 has been an unusual year in several respects. In the general aviation segment, as in the other lines of business, prices have continued to rise since the onset of the momentum in 2019, often associated with a reduction of insurers’ engagements. This reflects a return to underwriting discipline and a more moderate risk exposure. However, the unexpected outbreak of Covid-19 and the restrictions it caused, disrupted the general aviation sector.
Due to the travelling ban related to Covid-19, the general aviation market experienced a relative fall in the number of hours flown. However, contrary to what one might think, the claims decrease was not proportional. For instance, at least 3 mid-air collisions took place in France this year – which are quite rare events under normal circumstances leading to dramatic consequences.
The general aviation market is probably the one that was better positioned to navigate the storm in 2020. Although the sales of new aircraft were not flourishing, the players in the sector managed to adapt themselves despite the impacts of the crisis. For example, in responding in an agile way to requests for medical repatriation or in providing firms with alternative solutions in geographies where airline companies were forced to cancel flights.
Regarding the helicopter segment, the substantial premium increase, which started in 2019 and gained momentum in 2020, goes in the right direction. Even if the premium level remains insufficient to support the sector’s claims experience, LRA will maintain its risk selection and will only participate in this segment if premium budgets are consistent with the risks covered.
As far as the professional drone users’ segment is concerned, LRA is already well-positioned and will continue to support the sector’s boom in increasing preferred partnerships with its specialized intermediaries.
Generally speaking, LRA, in its role as a general aviation underwriting agency for more than 65 years and leader in its domestic market, will continue to stand by its numerous partners of different cultures, whether they are agents with a developed national network such as Generali and MMA, brokers specialized in aeronautics or non-specialist intermediaries keen to provide their clients with a global solution.
As such, LRA has been the first player in the market to grant a specific Covid-19 premium discount to its clients holding non-adjustable policies, in order to support them during this very particular year.
LRA also took advantage of this year to hire a senior international underwriter and strengthen its teams in Paris and London. Therefore, our clients and brokers can rely on a highly experienced underwriting team, allowing LRA to deploy its know-how in general aviation in France but also globally.
Christophe Kleider General Aviation Portfolio Manager
Christophe KLEIDER, General Aviation Portfolio Manager
Norbert BOULLAY, General Aviation Underwriter
- the reduced launch activity, mainly as a consequence of the sanitary crisis
- and the placing conditions negotiated in a bear market.
HEAD OF SPACE
Christian BUQUET, Business Administrative Handler