Lloyd’s has insured planes in China for the last three decades. We started working with China’s Civil Aviation Authority (the State Council ministry responsible for Chinese civil aviation affairs) 22 years ago, providing highly specialised hull cover.
To celebrate this relationship lloyds.com talks to the lead brokers and an underwriter involved about how the relationship has grown from providing cover for four small planes to a relationship worth about $32 billion.
China: the early days
Back in 1974, China’s great economic renaissance was yet to begin. So, when Lloyd’s first covered four Boeing 707s belonging to Chinese airlines, we never suspected how much our capacity and skills and experience would be in demand.
Today, the Chinese fleet consists of over 750 aircraft, with an insurance value of around $32 billion. And we’re pleased to say we are still very much on board, working closely with the People’s Insurance Company of China (PICC) to provide the highly specialised hull war cover (a type of insurance which covers civil war, strike, riot, acts of sabotage, seizure, and plane hi-jacking) enabling the country’s airlines to keep flying.
A relationship built on adaptability and performance
Relationships that stretch decades are by no means unusual for Lloyd’s. But, as David Reed, a broker at Marsh points out, what makes this one exceptional is the enormous change and extraordinarily rapid growth that have taken place over the last three decades.
“It’s our adaptability, dynamism and performance over time that has enabled us to maintain continuity, and keep pace with the client’s changing needs,” he says.
That adaptability, in particular, is well demonstrated by the unique way in which Marsh and Willis work together as “revolving” lead brokers – each taking the prime responsibility for providing the PICC with the right cover at the right cost for a year at a time.
Edward Bond of Willis says: “With so many high valued assets at risk we are extremely accountable to our client. In an ever more uncertain world Lloyd’s must offer not only a competitive product but also meet the stringent requirements of the Chinese carriers. Making informed decisions on the scope of coverage as well as identifying the most appropriate programme leader.”
Syndicating risk: Lloyd’s biggest strength
Lloyd's insurer Amlin, through underwriter Mick Noble, has taken the all-risks lead on the PICC account for more than 20 years, and Atrium leads on the war account. Bruce Carman, of Atrium, explains that the underwriting challenge is to continue to increase capacity and cover the increasing demands of the risk but at the right costs with the right terms and conditions.
“Syndication of risk is what Lloyd’s does well,” he says.
“And we’ve been able to offer our expertise to others in the market who don’t normally participate in this class of business, to give them the opportunity to join forces with us, to meet the client’s coverage needs.”
And the challenge is about to get even bigger – as the massive new Airbus A380 comes into service. With 555 seats and a wing span equivalent to a football pitch, each of these monstrous machines will have an insurance value of up to $300 million. Faced with this, some insurers might pack their bags. But at Lloyd’s, we’ve always taken the world’s biggest and toughest risks in our stride. And that includes the super-jumbo kind.
The A380 touched down at Heathrow for the first time in May after completing a test flight in April.
With thanks to:
Client: People’s Insurance Company of China (PICC)
Brokers: Edward Bond, Willis and David Reed, Marsh
Underwriter: Bruce Carman, Atrium and Mick Noble, Amlin
