Canadian Perspective

The Canadian aviation insurance market is relatively small in the global picture, notes Mike Wills, manager of marine and aviation at Royal & SunAlliance. The Canadian industry’s total aviation net premiums amounted to Cdn$83.8 million for 1997 compared with the previous year’s total of $89.5 million.

However, despite its modest size, the Canadian market has been subject to the same intense competition as the European and U.S. markets, says Wills. In fact, based on the low premium volume, little if none of the underwriting of the business is handled from within Canada. The bulk of Canada’s aviation business falls into the general aviation category (including aircraft with 40 or less seats) which is now experiencing the pinch of increased losses. “A lot of companies are pulling out of the business because they don’t believe they will ever make in money out of it,” he comments.

Fixed-wing aircraft are generally more profitable risks, Wills observes, with helicopters having produced the highest losses over recent years. “The risk issues here are perhaps a little different than the U.S. in that helicopters and small aircraft are frequently used as the only access to some of the more remote areas.” The losses emerging on helicopters are mainly due to the fact that they are employed as “commercial workhorses” and subject to tough operating conditions. “It’s not really an issue of safety being questioned, all the checks and inspections can be made and losses will still arise,” Wills notes.

A broker working with one of the larger Canadian aviation accounts agrees that rates have been cut to the skin and bone. “From a client point of view, the current soft cycle is good, however, if you are an underwriter, it’s not so good.”

The broker says the majority of losses relate to aircraft on the ground, with parking lot damages producing some hefty price tags. “Unlike auto insurance where most claims relate to minor accidents and repairs, a little ding to one of the big jetliners can cost $75,000.”