Aircraft owners and operators fear higher insurance premiums after a global insurer cut the operation of its aviation business in Australia.
The Australian has learned that American International Group ceased its aviation business in Australia and New Zealand from May 9, and has cited a strategic review of local market conditions and its portfolio.
It is understood AIG has told brokers it will continue to write “certain” components of the portfolio from its Asia-Pacific hub in Singapore where possible, where claims will still be serviced.
“Given the aggressive level of price reductions and breadth of coverage being offered by our competitors, AIG Australia is simply unable to achieve long-term scale and sustainable profitability across the full suite of aviation products being offered in the Australia marketplace,” a spokesman said in written response to The Australian.
“As a result of these considerations we have made the difficult decision to exit this line of business locally.”
However AIG said it was committed to aviation as a core business globally and subject to regulatory requirements was “still looking to support certain components of the portfolio out of the AIG aviation hub located in Singapore”.
There were “a number” of accounts the group would seek to support from Singapore.
Brokers had been told that as a general rule these accounts included airports and service providers such as catering, ground service, refuelling, airside liability and industrial aid aircraft, the spokesman said.
The move comes after Allianz also pulled its aviation business out of Australia this year following a review of the local market. Allianz began putting aviation business written out of Australia into run-off from January 1.
AIG’s move has fuelled warnings about pressure on Australia’s once-thriving general aviation sector, which says it has been plagued by excessive red tape.
Aircraft Owners and Pilots Association of Australia executive director Benjamin Morgan said he was worried the withdrawals would lessen competition, leading to “increased premiums for operators and owners, placing further pressure on an already stressed general aviation economy”.
But AIG said that while it was difficult to predict the “exact impact” on aviation businesses in Australia, “we believe considerable competition still exists within the insurance marketplace and insureds should still benefit from a healthy level of capacity and appetite for their aviation insurance needs”.
Mr Morgan said it was “a clear sign Australia’s general aviation industry is failing and at an alarming rate”.
“AOPA Australia has been vocally warning the government for the past year that further industry decline would occur, unless immediate reform was initiated, yet our calls have been ignored.”
Data released last year by AOPA Australia found general aviation pilot numbers had fallen 34 per cent in 10 years.