Aviation Reinsurance rates

[Parker_Woodruff]

I thought you may find this article interesting as it discusses some of the more “macro” trends that affect aviation insurance rates. 
 

This, of course, does *not* mean a 250% increase in general aviation rates. It does mean that margins at aviation carriers will be significantly reduced for 2021 unless rates go up again. 
https://www.insurancejournal.com/news/international/2021/01/04/595857.htm

[MooneyMitch]

My generalized opinion is, as rates increase drastically (all things being relative, I consider my recent premium increase to have been drastic...... not sure how much more I can financially tolerate), general aviation owners of small aircraft of lesser value (speaking of my Mooney) will be chased out of the insurance market.  

 

This will leave us with either flying with no insurance (not acceptable for myself), self insuring, or liquidation of one’s airplane.

 

With my aircraft being at the lower end of the aircraft valuation spectrum, it will attract a potential purchaser at the lower end of financial means for such.  Couple that along with the exorbitant premium rate for such, it’s quite probable my aircraft becomes un-marketable. 

 

Sad. 

[Andy95W]

Mitch, I think you're being overly pessimistic.  I don't think the future is rosy, but I also don't think its nearly as bleak as you portray.

For the nearly 30 years I've owned an airplane, I've seen the market cycle up and down.  You've probably seen the same thing yourself.  Do you have any reason to believe this time will be different?

[Seth]

Fascinating Parker - thanks for the update!

 

-Seth

[hammdo]

Very interesting read... 

Sounds like it will keep going up for the next couple of of years until the insurance companies have their pool built up again... 

-Don 

[MooneyMitch]

1 hour ago, Andy95W said:

Mitch, I think you're being overly pessimistic.  

Me, overly pessimistic?  So unlike me .   Anything’s possible I suppose ...... maybe we’ve just had it too good for too long ......as I stated, time will tell....... I’d love to be wrong .....

[kortopates]

None of us like seeing the premium increases. But I still consider insurance a pretty small part of my annual flying expenses at not more than 10%. I really don't ever see it's cost making the difference between me flying or not; but not being covered would.


Sent from my iPhone using Tapatalk

[jetdriven]

It does for us. Our premium went from 2300$ to 4700$, 1977 M20J, 140K hull.  no claims, nothing, ATP and 10K plus hours, etc. Insurance 4700$.  Hangar 6K. Everything else, 7K.  its now a third of the whole thing, nearly.

[MooneyMitch]

I’m referring to Mooney aircraft (or other brands if you wish) in the lower dollar range, such as my old D/C.  I don’t know the market value of such with my new paint/interior....$35K-45K possibly?  A guess at this point.  

Or the fellow saying his ‘66 E model (also an old airplane at the lower end of the Mooney dollar investment level) premium is now $5100.00.

At what point is a potential wanna be owner of the lower priced birds going to be able to justify the relatively high insurance premium in addition to other ownership expenditures? 

Theses are people with smaller budgets than those that are able to purchase and support the newer, higher valued models.

I may be too pessimistic as mentioned, but I do feel the potential is there for rendering our old airplanes un-marketable, or greatly devalued (relatively speaking), depending of course on where these drastic premium increases subside.

Let’s hope this current exorbitant upward trend levels off, sooner than latter.

[PT20J]

You’ll go nuts fretting over the peaks and valleys. It’s just like the stock market. Don’t react to short term pricing. It’s the average price over the length of ownership that matters. 

I’ve noticed that a lot of folks resent paying for insurance because it’s a product no one wants to use. 

I’ve realized significant reductions in my auto insurance for my three cars this year due to COVID that have offset much of  the increase on the airplane. 

Skip

[DXB]

This year's increase was pretty substantial for me - it's worth noting that monetary increase may be an underestimate as my carrier did away with some fringe benefits also - e.g. free Savvy breakdown insurance.  

At some point it will definitely make sense for me to go liability only.  As much as I love my plane, at 75k insured hull value, it is actually not the main asset I'm trying to protect by buying insurance, but it makes up the lion's share of what I'm paying for coverage.  

[jlunseth]

On 1/8/2021 at 12:38 PM, Andy95W said:

Mitch, I think you're being overly pessimistic.  I don't think the future is rosy, but I also don't think its nearly as bleak as you portray.

For the nearly 30 years I've owned an airplane, I've seen the market cycle up and down.  You've probably seen the same thing yourself.  Do you have any reason to believe this time will be different?

It does? Cycle up, yes. Flatten for awhile, yes. Down, well you let me know when that one is going to happen. I am not picking on you, but other than the auto carriers cutting rates because no one has been driving this summer, I don't ever remember insurance rates actually going down. The rate of rate growth might slow down, but that is about it.

On a completely unrelated topic there was a study done by the St.Louis Federal Reserve about 2006 that concluded that traffic ticket issuance goes up during recessions (when local governments need $$), but then do not go down. https://research.stlouisfed.org/wp/more/2006-048. They may flatten until the next recession, but they do not go down.

Same thing.

What is needed to make rates go down is bargaining power, which is a rare thing for an individual to find.

[Parker_Woodruff]

29 minutes ago, jlunseth said:

It does? Cycle up, yes. Flatten for awhile, yes. Down, well you let me know when that one is going to happen. I am not picking on you, but other than the auto carriers cutting rates because no one has been driving this summer, I don't ever remember insurance rates actually going down. The rate of rate growth might slow down, but that is about it.

 

If you weren't receiving premium reductions from about 2008 to 2018 then you must have had extenuating circumstances because that is not the norm for 90% of GA aircraft owners.

[jetdriven]

We didn’t.  Every year (8yr) we had more hours in type and more experience, but premiums were flat. 

[Andy95W]

4 hours ago, Parker_Woodruff said:

If you weren't receiving premium reductions from about 2008 to 2018 then you must have had extenuating circumstances because that is not the norm for 90% of GA aircraft owners.

My rates dropped consistently during that period, though I will concede to @jlunseth that the total decrease was less than the increase in 2019/2020.

[aviatoreb]

On 1/8/2021 at 10:45 PM, jetdriven said:

It does for us. Our premium went from 2300$ to 4700$, 1977 M20J, 140K hull.  no claims, nothing, ATP and 10K plus hours, etc. Insurance 4700$.  Hangar 6K. Everything else, 7K.  its now a third of the whole thing, nearly.

Wow - it jumped in one year this year from 2300 to 4700?

[ArtVandelay]

It does for us. Our premium went from 2300$ to 4700$, 1977 M20J, 140K hull.  no claims, nothing, ATP and 10K plus hours, etc. Insurance 4700$.  Hangar 6K. Everything else, 7K.  its now a third of the whole thing, nearly.

I’ll go bare if does that....or even half that much.

[Parker_Woodruff]

12 hours ago, jetdriven said:

We didn’t.  Every year (8yr) we had more hours in type and more experience, but premiums were flat. 

Didn't have much competition in the few years after your hail loss though

[PT20J]

I’ve worked for a couple of Part 135 operators that have highly seasonal businesses. They would remove unused aircraft from the insurance during the off season. In parts of the country I’ll bet some Mooneys don’t fly much during 3 months of the winter. I wonder if it would work to negotiate a non-flying rate for part of the year and put the airplane in storage?

Skip
 

[Parker_Woodruff]

6 minutes ago, PT20J said:

I’ve worked for a couple of Part 135 operators that have highly seasonal businesses. They would remove unused aircraft from the insurance during the off season. In parts of the country I’ll bet some Mooneys don’t fly much during 3 months of the winter. I wonder if it would work to negotiate a non-flying rate for part of the year and put the airplane in storage?

Skip
 

Some carriers will give a layup credit or allow a move to ground not in motion for 60 or 90 days without flying.  You have to notify when it's going to ground and then notify when ready to fly.

It would probably save around $100-150 per year for a typical F model...and you wouldn't have any flexibility for the few nice days when you want to jump in the plane and go.

[MooneyMitch]

“Posting for a friend.  He is the latest victim of age related inability to insure his Mooney due to his age“

I copied the above from the classified section for the ‘63 C model for sale.

Is it feasible to think an entry level (old, medium, or young) pilot is going be motivated to purchase this airplane and then pay possibly $5K +( probably more for a low time pilot) for insurance? Or is it feasible for a potential buyer to bind liability only?  Is it possible the hull only insurance  concept of purchasing an older Mooney may lower the value of the aircraft?  

Not being pessimistic, this is a real situation with a long time owner selling his Mooney due to, at least, drastic premium increases.

[ChrisV]

And I thought I was doing good until I got my insurance quotes this year... only flew 70 hours this year in the mooney, another 35 in a cessna, got my IR and my insurance went from $1530 to $1888. UGH!

[MooneyMitch]

16 minutes ago, ChrisV said:

And I thought I was doing good until I got my insurance quotes this year... only flew 70 hours this year in the mooney, another 35 in a cessna, got my IR and my insurance went from $1530 to $1888. UGH!

Relatively speaking, I’d say damage is minimal.  Congratulations.

[FlyingDude]

Insurance rate hikes have been discussed at many places.  I personally had an email exchange with my broker, who reiterated that there are fewer airplanes flying, a lot of recent damage claims due to calamities (tornados, fires) and accidents (gear-ups mainly).  This makes sense.  Insurance is capitalist socialism, where unlike a government which could borrow and get indebted when expenses soar, insurance companies need/want to stay afloat, so premiums go higher for the "constituents"...

BUT...

I can't help but wonder if the elderly folks are being majorly hit due to the medical certificate reform?  Could it be that insurance companies estimated that the lowered health screening will translate into more accidents with higher claims?  I mean, the medical exam in US is already simpler than what I did in Italy at initial release (e.g. resting and treadmill electrocardiogram, electroencephalogram, lung volume measurement, FULL bloodwork and urine test, and bunch of other things that took 6 full hours at a military hospital).  Subsequent renewals were conducted like in US.  I left Italy after 6 years, so I don't know if those tests repeat or were one and done, but when I did my initial Class 1 in US, it only took 1 hr.  I don't know, maybe they cut me some slack because I'm generally in good health. With the Basic Med, you can pretty much fly if you can drive, which taxes the body less than flying and health screening is much simpler... That's my speculation.  Anybody know any facts to corroborate / dispute what I thought of?

[FlyingDude]

On 1/8/2021 at 10:45 PM, jetdriven said:

It does for us. Our premium went from 2300$ to 4700$, 1977 M20J, 140K hull.  no claims, nothing, ATP and 10K plus hours, etc. Insurance 4700$.  Hangar 6K. Everything else, 7K.  its now a third of the whole thing, nearly.

Where are you located? I'm wondering if rate hikes hit those living on the tornado-earthquake-fire belt more than those of us who are buried under snow half the year