Pricing issues in aviation insurance and reinsurance
Abstract
Purpose
This article aims to examine the risk inherent in the insurance of the aviation industry, to take an outsider's look at those risks and to develop certain “capital market” pricing rules.
Design/methodology/approach
The aviation industry presents a classic low‐frequency/high‐limit insurance problem. Pricing such exposures is difficult because of the high degree of uncertainty involved. After a review of the considerations that an insurance underwriter traditionally brings to the problem, the author applies a simple pricing rule incorporating current thinking on risk evaluation.
Findings
The results of the author's approach are compared with the results of traditional pricing rules, generating interesting insights. The application of the new methodology to the analysis of current pricing and of alternative proposals is suggested.
Originality/value
The article will be of value to those interested in the aviation industry and in the pricing of insurance and reinsurance.
Keywords
Citation
Lane, M.N. (2005), "Pricing issues in aviation insurance and reinsurance", Journal of Risk Finance, Vol. 6 No. 3, pp. 192-207. https://doi.org/10.1108/15265940510599810
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited