The airline insurance market will remain soft through the end ofthis year, a brokerage reported, but increased losses could turnthe market in the opposite direction during next year's renewalseason, the study said.

Chicago-based Aon earlier this week issued a renewal seasonspecial report for November saying that rates fell 8 percent forhull and liability coverage.

However, the level of reduction, the report went on, is lessthan it was in the first half of the year, possibly a bellwether ofa market turn.

“Even given the high level of capacity and the low level oflosses in recent years, it seems unlikely that the market cancontinue in this direction,” the report said.

In a separate report, “Airline Insurance Review, Pre-renewalSeason 2007,” Aon noted that over the first nine months of thisyear hull and liability lead premium rates have fallen 15 percent.However, during that same period exposures have increased withfleet value growing by 11 percent over the same period last yearand passenger numbers up 12 percent.

Compared to 2006, 2007 has seen 80 percent more fatalities, hulllosses increase around 18 percent, and liability losses nearlydouble. There have been 34 major losses in 2007, amounting to $421million in hull loss and $407.6 million in liability loss, totalingmore than $828 million.

Aon noted that there has not been a major loss in a long time,“but the cumulative impact of smaller incidents could mean that themarket will become an increasingly unprofitable place to dobusiness if the reductions continue.”

“It seems unlikely that the market direction during 2007 cancontinue into 2008, and less soft market conditions are likely as aresult,” Aon said in its special report.

Copies of the report are available online at www.aon.com underpublications.