Airline Insurance Market: Slow Ascent

Hull and liability premium prices in the airline insurance market are likely to continue to rise in 2010, but the rate of increase could slow as a result of the high level of capacity that is still available, according to Aon’s Airline Insurance Market Outlook 2010. Aon says there are a number of reasons why the price rises are not likely to continue at the same rate in 2010. Firstly, while average lead hull and liability premium in the airline insurance market rose by 20 percent during 2009, taking total lead hull and liability to $1.9 billion, average annual claims over 10 years came to $1.8 billion. This means the airline insurance market’s current level is now enough to comfortably cover claims in an ordinary year, according Aon. Still as 2009 has proved, there is always the potential that there will be an extraordinary level of claims in a given year (total estimated claims for 2009 came to $2.3 billion), but overall the hard markets have now served their purpose and prices have risen to the point they need to be to ensure that total premium and average claims are roughly in balance. Proof that the markets have reached the equilibrium point comes from the fact that some underwriters that were holding back capacity in 2008 and 2009 are now being encouraged to participate on airline insurance programs, Aon notes. New capacity is also being attracted to the sector, a fairly sure sign that prices have reached the appropriate level. Equally, while 2009 was, hopefully, an exceptional year in terms of airline claims, the fact that the actual number of losses was relatively limited should mean that a smaller number of airline underwriters will have taken a hit on their airline books of business, Aon believes. Check out I.I.I. aviation facts and stats.

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