Reversing a five-year trend, airline lead hull and liabilitypremiums on average increased by 7 percent last year, according toAon insurance brokerage's London office.

Aon's "Airline Insurance Market Outlook 2009" said the uptickfollowed an 11 percent decline in 2007, representing an 18 percentupward swing in the last two years. The trend is likely tocontinue, the firm said.

It reported total lead hull and liability premium rose from$1.51 billion in 2007 to $1.6 billion in 2008, while insurers areestimated to have paid out $1.45 billion in claims last year.

Aon projected that many underwriters are likely to be in aoverall loss position for 2008, and that as a result of a varietyof factors including fixed and reinsurance costs, they will beunder further pressure in 2009 as capital providers scrutinizetheir current levels of investment.

Among the key report findings are:

o In 2008, 63 percent of airlines received an increase in theirlead hull and liability premium, compared to 28 percent in2007.

o Fatalities related to airline incidents in 2008 were at theirlowest since 2004 and the third lowest since 1995.

o Total hull and liability claims were fractionally below thelong-term average and around 25 percent below the 2007 total.

o Average fleet values in Asia became the largest in the worldin 2008, while North American fleet values shrunk.

Simon Knechtli, Aon Global UK Aviation & Aerospace PracticeLeader, commented in a statement that, "The market appears to havepassed the low ebb it reached in 2007 when total lead hull andliability premium fell to around $1.5 billion, down from over $2billion two years before."

Mr. Knechtli added, "Underwriters are now driving to sustain thepremium increases in order to ensure profitability. The challengefor airlines in 2009 is going to be ensuring efficient andcost-effective insurance and risk management programs against abackdrop of falling consumer confidence and revenues."

The report also said that total incurred losses for 2008 standat $934 million, well below the $1.48 billion reported for 2007 andfractionally down from the $1 billion 1995-2007 average.

Cargo carriers, the report found, contributed 16 percent of thelead hull and liability premium in 2008, slightly higher than the15 percent of claims that the sector represented. In 2007, thesector contributed 14 percent of the premium, but was onlyresponsible for 2 percent of the claims.

While the largest 20 airlines by average fleet value contributed45 percent of the total annual of lead hull and liability premiumduring 2008, removing them from the data would mean that the leadhull and liability premium increase would have been 9 percent in2008, as opposed to 7 percent, suggesting that they may not havereceived significantly preferential treatment, Aon said.