Page 12 - Volume12 Number 5

King Air Insurance
Market Update
by Kyle White
The first quarter of 2018 is behind us and many of you spent April reflecting upon the opportunities, challenges and results from the first three months of the year to forecast what the rest of 2018 may hold for your business, flight department, operating budget or other goals. Upon reflection of insurance policy placements made year-to-date we discovered some interesting trends in the U.S. market to share with King Air owners and operators.
Fifteen years ago, many of you may not have owned or operated a King Air. To fully understand the market trends, we need to reflect on the past, so you have a baseline with which to compare. The insurance market for a King Air was significantly more expensive in 2003, compared to the current market. In addition to higher premiums, the restrictions and ancillary coverages were difficult to negotiate in favor of the insured. This was attributed to the limited supply of carriers writing insurance for King Air owners. If a King Air owner needed $50,000,000 or more in liability coverage, there were only three choices. With limited carriers to select from, the underwriters were in control. This is what we call a “hard market,” which is where rates are comparatively high, coverages are limited, and conditions, such as the requirements of the pilot who would be operating the aircraft, were tough. Essentially, the insurance company was greatly reducing their risk while maximizing their premiums. For example, in 2003, a $1,000,000 King Air B200 with $50,000,000 of liability would have cost over $40,000 per year, and many of the carriers would have
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required two pilots in the cockpit at all times, while single pilot operations were limited to $25,000,000 of liability coverage.
The profits generated by the aviation insurance carriers began to be noticed by other insurance companies who weren’t currently in the aviation marketplace. Not surprisingly, they wanted in on the action too, and the supply of insurance companies for King Air owners and/ or operators began to increase. At one time there were over nine insurance companies willing to write a King Air with liability limits of $100,000,000 hull values to cover the cost of a new King Air 350 and allowing single pilot operations. In addition to these increased coverages, the annual premium fell to as low as $13,000 per year for these high liability limits and hull values!
In the mid-2000s, Travelers® Insurance entered the aviation market and they were very aggressive with pricing and coverages; so aggressive that I remember clients asking if the quote was for six months of coverage instead of an annual policy. Within a few short years, the premiums were cut to a fraction of what they once were, ancillary coverages blossomed, and pilot restrictions were slashed. After approximately 24 months, Travelers left the aviation sector, but the market had been forever changed.
As time passes and we watch market trends, it appears 2017 may have been the bottom of the “soft market,” which is the time when the insured controls the market. We saw some insurance companies willing to allow training to be extended to 18-month intervals
MAY 2018