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Green shoots of recovery for aviation despite tragic start to 2020

Source: Middle East Insurance Review | Feb 2020

The aviation sector was greeted with the unfortunate news of the crash of Ukraine International Airlines flight in Iran early January which killed all 176 people on board. The Boeing 737-800 plane was bound for Kiev when it crashed just minutes after taking off at the Imam Khomeini airport in Tehran.
But despite the tragic start to the New Year, the aviation industry has actually seen a general trend of declining aviation fatalities even as air travel increases sharply. In fact, the number of plane crash fatalities reduced by more than 50% in 2019, according to a recent report released by aviation consultancy To70.
With air passenger safety under strong scrutiny after two crashes in close succession of the Boeing 737 Max aircraft in late 2018 and early 2019, the number of plane crash fatalities reduced by half last year to 257 compared to 534 in 2018.
Half of those deaths last year were the result of the crash involving Ethiopian Airlines Flight 302 which killed 157 passengers, resulting in the grounding of the entire Boeing 737 Max fleet.
Soft aviation insurance market bottoming out
From an insurance perspective, aviation rates have been soft for nearly a decade. In fact, the past five-year average total airline claims have exceeded total airline premiums by approximately $400m per year, according to figures provided by Marsh.
Hence, it is not surprising that as many as 20 insurers have exited the class or withdrawn from specific business lines in recent years. M&A involving some of aviation’s largest capacity providers – such as AIG’s acquisition of Validus and AXA’s purchase of XL group – have further reduced capacity in this segment.
However, the market seems to have bottomed up, with signs that upward movement of rates in 2019 could continue to hold momentum in 2020, according to analysts.
This could be counterbalanced if the improvement in underwriting results attracts both dormant and new capacity back into the aviation market. M 
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