Airline Insurance Market: Losses Threaten Stability

Conditions in the airline insurance market have been getting calmer throughout 2010 and the market appears to be stabilizing, according to Aon’s Airline Insurance Market Indicators 2010/11 report.

While lead hull and liability prices continue to rise, the increases are tending to be lower than exposure growth, Aon says. This means that in real terms, the cost of airline insurance is falling.

At this point, it seems that there is the prospect of a stable or even soft insurance market for the rest of 2010 and into 2011, which will be welcome news after the difficulties that the airline industry has endured over the last couple of years.†

Aon reports that between January and July 2010, average lead hull and liability premium rose by 7 percent, average fleet values grew 9 percent and average passenger forecasts grew by 13 percent.

Nevertheless, the airline insurance market is perilously close to suffering a fourth consecutive year without return. Why?

A string of major losses since May has now put the 2010 claims level well above the long term average. Aon notes that total claims so far this year excluding minor losses are $996 million, compared to a long term average of $612 million.

If there are no more major losses during 2010, Aon estimates total losses for the year including minor losses will be in the region of $1.8 billion, while total lead hull and liability premium for the year will be just over $2 billion.

Taking fixed costs into account, this means that there is a very real possibility that the airline insurance market will make a loss for a fourth consecutive year.†

If this is the case Aon suggests that commitment to the sector may fall in 2011 and prices could rise as a result.

Check out I.I.I. aviation facts and stats.

Leave a Reply

Your email address will not be published. Required fields are marked *