LONDON, Aug. 4, 2003 (PRIMEZONE) -- Effective August 4, Brit (Other OTC:BTIHF) will cease underwriting direct aviation risks, including airlines, general aviation and aviation product risks. The aggregate premium income of these lines of business was forecast to be approximately GBP60m for the 2003 year of account, of which approximately GBP22m has been already written. The account is currently forecast to be profitable for 2003.
Aviation Reinsurance, Aviation War and Space business will be unaffected.
Since the bulk of the account is renewed in the last quarter and the premium is earned over the subsequent 12 months, this decision is not expected to have a significant impact on the earned premium income figures for 2003. Brit will manage the run off of all existing accounts to conclusion.
Dane Douetil, Chief Executive of Brit's underwriting, said: "Despite opportunities, we do not feel that the aviation market has been able to sufficiently re-structure its product offering to give us sufficient comfort that the account will provide a suitable return on capital employed over the medium and long term.
"There are a number of hurdles to the changes that we believe are essential to the way this business is insured if it is going to produce consistent return to insurers. Many airlines are facing difficult economic conditions stemming from a sharp downturn in long-haul passenger numbers and the number of brokers controlling the significant majority of premium in this class is limited. These factors, and the material reduction in premium levels since the peaks reached following the losses of 11 September 2001, have lead us to this decision.
"The vertical and sideways exposures that are typical, particularly in airline accounts, mean that the market is overly reliant on reinsurance, this is not consistent with our prudent approach to counterparty risk.
"Fundamentally, while we believe that our account is currently profitable, the risk to reward balance that this account represents does not fit with our portfolio."
Neil Eckert, Chief Executive of Brit Insurance Holdings PLC, said: "This decision represents the first true test of our vigorous approach to asset allocation. The decision was not based on price alone but also on the structure of the product and the Group's developing strategy. We are focusing on specific product lines where we feel that the underlying business is healthy and can form a core part of Brit's future. Whilst aviation may currently be profitable, we feel that we can more effectively deploy our capital in other areas of our business."
This information is provided by RNS
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