All this talk about a “new normal” of predictable unpredictability at first seemed like a post-pandemic cliché to me, but I’m beginning to think there’s more to it. Who would have thought we’d see inflation reaching high single digits, mortgage rates exceeding 7 percent amid an economy headed to an elusive “soft landing,” regional airline first officers earning more than fast-food wages, or me flying an instrument approach to near minimums through smelly wildfire smoke to get into Teterboro, New Jersey?
The aviation insurance market hasn’t proven to be any more predictable than the world at large. One would expect rates to stabilize after five years of increases, but they are still going up. Similarly, underwriting criteria haven’t loosened and are still tightening in certain areas, such as war risk. This volatility is driven by largely unforeseen domestic and global factors. On a domestic level, inflation of parts and labor and stubborn supply chain issues continue to increase costs to settle hull claims. Also, attorney rates and litigation costs are rising, so insurers pay more even if they prevail in successful defense of their insureds. Globally, the market is facing billions of dollars of unexpected claims because of the Russia-Ukraine conflict, followed closely by the $3 billion Boeing 737 Max claims saga. And to add insult to the injury of unpredictable outcomes, aircraft that were destroyed in the Sudanese conflict earlier in 2023 could result in another $250 million to $300 million of losses.
