As the saying goes, the more things change, the more they stay the same. If you've been around aviation long, you probably know the aircraft insurance industry is cyclical: Rates rise and rates fall. Underwriting requirements stiffen and underwriting requirements relax. High limits of liability are available and then they're not. One thing is for sure, if you don't like what you've got, wait a while; it will change.

Change certainly describes what the industry experienced in 2006. Most notably, two new insurance companies emerged, increasing to 11 the markets able to handle a variety of general aviation risks available to agents. Rumor has it that at least one more is on the way!

Adding new underwriting companies to our industry is not altogether unusual, but there is a significant difference this year: The companies entering the fray are well-established entities that are "household names" in the insurance industry. These companies have chosen to enter the general aviation insurance market in the U.S., and they come to the table with the ability to insure high-value fleets and provide liability limits up to $300 million or more. This means that many turbine aircraft operators and fleet operators requiring higher limits of liability may have a few new choices. Having been limited in past years to as few as three insurance companies with the necessary capabilities, this group now finds themselves with six or more insurers wanting their business!

Who are the new players? C.V. Starr was the first to arrive on the scene in January 2006 when a number of senior executives left AIG Aviation's home office in Atlanta to set up shop for a company controlled by AIG's former Chairman, Hank Greenberg. Under an arrangement between Starr and AIG, a subsidiary of Starr by the name of American International Aviation Agency handled most of AIG's airline insurance business. In the wake of the contingent commission scandal that received so much press throughout the nation, Hank Greenberg left AIG and the process of unraveling the tight relationships between companies began. C.V. Starr evolved into a new underwriting company expanding into the world of general aviation.

In May, Starr announced it would change its name to Starr Aviation Agency, Inc., a move more accurately reflecting alignment with its parent company. Then, in June, Starr Aviation announced that it had entered into an agreement under which The Chubb Corporation will provide hull and liability coverages to Starr's general aviation clients. Having Chubb "paper" providing security for the insurance offered by Starr clearly places Starr in a position to compete head-to-head with some of the long-standing players in the industry.

In July, Starr also hired a team of qualified underwriters to provide workers compensation coverage to its aviation customers. This comes as a breath of fresh air to an industry with limited options for obtaining workers compensation coverage.

Throughout the fourth quarter of 2006, Starr proved very active in the general aviation community competing aggressively to insure mid-size and larger corporate and commercial operators. Starr is expected to continue expanding their product line offering coverage to additional segments of the general aviation community in 2007.

The German insurance giant Allianz was the next entrant to surface in the GA community. In April 2006, this well-recognized insurance provider, with annual premiums of over $120 billion, announced its intention to establish a dedicated aviation unit based in the U.S. The new unit will focus exclusively on U.S. aviation clients including airlines, manufacturers, airports, service providers and all types of general aviation including privately owned, commercial fleets and business jets.
 
Under the name Allianz Aviation Managers, LLC, two former USAIG top executives began the process of hiring an experienced team of aviation underwriters. Currently, Allianz has underwriting offices handling general aviation insurance located in Denver, Atlanta and Memphis, with the New York office focusing on airline and manufacturer's products liability.

Although Allianz is offering coverage to a wide variety of operators from instruction and rental fleets to corporate flight departments, they have indicated their strategy is to serve mid-size and larger premium accounts. In a step uncommon to the industry, Allianz has chosen to work with only a limited number of brokers throughout the U.S.

Since opening the doors in mid-2006, Allianz has demonstrated their desire to compete aggressively with the established insurance companies. Like Starr Aviation, Allianz is expected to continue growing in the coming year and have an expanding influence on the industry.

Although it is unofficial at this point, rumors are that one more new player will enter the U.S. general aviation insurance market in the very near future. St. Paul Travelers has reportedly retained an experienced aviation insurance executive to establish an aviation division with the intent of beginning operations in mid-2007. This new entity, which will most likely operate under the name Travelers Aviation, is busy recruiting underwriters and claims representatives and dealing with the regulatory obligations of establishing a new line of insurance business.

According to the latest information, Travelers Aviation's office will be located in the Atlanta area. Initial indications are that they will begin by offering insurance for corporate fleets, airports, airport-based service providers, non-critical products manufacturers and, eventually, light aircraft. Travelers will continue to offer airline coverage through their facilities in London.

In addition to the groups mentioned above, there are two other names new to the aviation insurance business in the U.S. Both Berkley Aviation, LLC (a W.R. Berkley Company) and Inter-Aero (a Managing General Agent for Arch Insurance Company) were also formed in 2006. Although these entities may have limited involvement on large commercial accounts, they are expected to focus primarily on airline and manufacturer's products liability.

So, what impact will all these changes have on you, the insurance buyer? Well, do you remember the law of supply and demand from Economics 101? The second half of the theory claims that prices will tend to fall when the quantity supplied exceeds the quantity demanded. And that is exactly what we have seen happening in many areas of the aviation insurance business over the last six months.

Following the events of 9/11, most aviation operators experienced significant premium increases. The higher rates, combined with relatively low aviation loss levels over the ensuing years, have resulted in most insurance companies recognizing handsome profits. That, in turn, has attracted new companies in hopes of getting their arms around that pot of gold at the end of the rainbow. As the aviation insurance companies compete for the business, the operators benefit from reduced premiums and other coverage improvements!

The changes of 2006 and those expected in 2007 will likely benefit most aviation insurance buyers. Be careful, however, in the budgeting process. Not all segments of aviation will be getting lower premiums at renewal. Competitive prices will go to those classes of business the new carriers are most anxious to write. You will be best served by being aware of the changes in the industry and by relying on your broker to help you navigate through the options for insuring your operation in 2007 and beyond.