Aviva, RSA slash airline exposure

INSURANCE groups Aviva and Royal & SunAlliance are slashing their exposure to the airline industry. Aviva is selling its 50% stake in Global Aerospace Underwriting Managers (GAUM), the world's biggest specialist aviation insurer. It is also withdrawing its underwriting capacity to the pool that GAUM manages. RSA is cutting its GAUM stake from 50% to just 10.1%.

Both are withdrawing from aviation insurance, one of the biggest loss-making sectors in the past 10 years, to concentrate on less risky areas of business.

However, several companies have been attracted to aviation insurance since the 11 September attacks in the US because premiums have rocketed while claims have been relatively light, meaning they stand to make large profits from it this year.

London-based GAUM underwrites aviation risks, including insurance cover for many of the world's leading airlines as well as airplane makers Boeing and Airbus.

Aviva wants to focus on life, pensions and personal lines insurance. RSA said the moves would reduce its risk exposure, the central goal of the group's wide-ranging restructuring plan to bolster its balance sheet. The action will cut RSA's net written premium income by £110m next year in 2003, but will release capital of approximately £45m.

Reinsurer Munich Re, Warren Buffett's Berkshire Hathaway and Swiss reinsurer Converium will take over GAUM's ownership.