NU Online News Service, Nov. 29, 3:25 p.m. EST

The aviation insurance market is showing signs of softeningdespite this year being on track as one of the costliest loss yearsin history, according to a report from Aon Risk Solutions.

In its December report, Aon Risk Solutions, a subsidiary of Chicago-basedinsurance broker Aon Corp., said that while overall premium numberspoint to a hard market, the fact that only eight of 22 renewalsduring the month of November experienced increases points to amarket that is in the process of softening.

Aon said the 19 percent average premium increase was borne bythree airlines that "either had losses, come of group insuranceprograms or both."

Setting those three aside, lead hull and liability premium pricewould have fallen 12 percent in November and grown by 4 percentduring the year.

"While the underlying position appears increasingly soft,airlines are being assessed on their own merits, and those withlosses are enduring significant price increases despite theprevailing trends," the report said.

If the current direction of the market continues, lead hull andliability premium for the year should total around $2 billion, butclaims should reach around $1.9 billion if there are no furthermajor losses.

"Taking into account fixed and reinsurance costs, this means theairline insurance market has not achieved a return for four years,"the report said.

Aon added that if the market is softening through the renewalseason, then the $2 billion the industry will collect in premiumcould be "somewhat optimistic."

On the loss side, theNov. 4 engine failure on a Qantas A380 aircraft that forced theplane to make an emergency landing in Changi International inSingapore shortly after takeoff resulted in close to $70 million indamage to the engine and aircraft wing.

Aon said the current loss figure for this year so far, excludingminor losses, is close to $1.46 billion compared to $1.63 billionfor the same period last year. Adding minor losses, it is estimatedthat overall loss is at $1.96 billion so far this year, compared to$2.09 billion last year.

"It should be pointed out that 2009 was one of the mostexpensive years in the airline industry from a claims point ofview," Aon said.

Aon also noted that the risk profile for the industry ischanging "from one of many relatively minor losses to fewrelatively major ones. This could imply that the industry's work toimprove accident rates in emerging markets has beensuccessful."