Introduction

The African aviation industry has witnessed a growth in mainly privately owned and funded investment in African airline operations. Presently, there are over 300 Airlines from 45 markets actively operating in the continent with over 1700 owned aircrafts and about 100 owned helicopters.

The Aviation insurance market worldwide is highly specialised and local capacities are limited in the African continent, where there is a strong demand for general aviation risks (with significantly lower exposures in terms of property damage and loss of lives) in addition to airline business.

At the 11th General Assembly of the African Insurance Organisation held in Libreville, Gabon on 19th July 1983, it was resolved to establish the African Aviation Pool (AAP). In addition to creating capacity for African aviation risks, it had the following objectives:

1. To accept non-African aviation business to have a spread of risks and to benefit from the experience of the international market.

2. Avail to the African Aviation insurance/reinsurance underwriters training and manpower development facilities to enable them have technically competent aviation underwriters.

3. Providing technical/professional services to the members of the Pool on matters relating to aviation insurance/reinsurance.

4. Making available to the African Airlines coverage and premium rates which are competitive and thus eliminate the possibility of some airlines being forced to pay unnecessarily very high rates.

5. To give the necessary technical support and advice to African airlines and AFRAA in matters relating to insurance and risk management and to give them all necessary cooperation in this regard.

The Pool started operation on 1st December 1983 and its first financial year extended to 31st December 1984. Since inception, the African Reinsurance Corporation has acted as the Manager of the Pool, providing proven quality leadership through the years.

Benefits of the African Aviation Pool to the African Markets

• Making available to the African market coverages and premium rates which are competitive, eliminating the possibility of paying very high rates.

• Ability to create capacity within Africa for aviation risks emanating from Africa, thus minimizing the foreign exchange outgo on aviation reinsurance.

• Potential for availing to the market training and manpower development facilities to enable them have technically competent aviation underwriters.

• Strength of the Pool providing confidence to the local market through:

a) Retrocession treaties with rated securities offering more confidence to the local market.

b) Management by an A- (S&P) A (AM Best) rated reinsurance Corporation (AFRICA-RE) with qualified and well experienced staff.

c) Adequate technical reserves and wide business base

• Providing technical/professional services to the members of the Pool on matters relating to aviation insurance/reinsurance.

The Future of the African Aviation Pool

Excess capacity has been prevalent in the global Aviation insurance market, leading to falling premium rates, impacting adversely on claims ratios.

An example of this effect is the trend in Worldwide Airline Hull & Liability premium and claims between 2009 and 2014. This trend is also noticeable in the African Aviation Pool with its lower premiums and loss frequency and severity.

However, it seems that insurers are beginning to be more selective in their underwriting of risks especially in the hull war market with its increased loss frequency in 2014 & 2015. In fact the hull war market has witnessed a number of underwriters exiting, thereby contracting available capacity. The remaining underwriters are wary and selective in their participation.

As Pool manager, we are hopeful that the year-on year double digit rate cuts will soon give way to stable or upward movement in premium rates in the coming years. In the meantime, we are exploring ways to boost the income of the Pool and diversify the risk base through reciprocal arrangements with other notable pools and risk bearing entities.