Airline Insurance Claims Drop 66%

NU Online News Service, Jan. 26, 12:06 p.m. EST

Airline insurance claims dropped 66 percent below 2010’s loss numbers, and pricing in the marketplace exhibited stability through the 2011-2012 renewal period, says insurance broker Aon.

In its Airline Insurance Market News report for the 2012 first quarter, the Chicago-based insurance broker says final loss figures for 2011, excluding minor losses, came in at $530 million compared to more than $1.5 billion in 2010.

With an estimate of minor losses added in, overall loss totaled $1.13 billion, 46 percent less than the $2.1 billion in 2010.

Fatalities were at their lowest since 1984 and it was also the lowest number of aviation claims since 1995, Aon says.

In December, Aon said there were a total of 175 fatalities under standard liability policies. The long-term average is 582 fatalities.

“The low level of claims in 2011 has meant that the market is estimated to have enjoyed healthy returns overall,” says Aon.

However, Aon went on to say, this is only the second time in five years that the industry has enjoyed such a low level of claims compared to premium.

Airline-insurance pricing will still depend on individual risks, with those airlines that have had a notable number of losses seeing increases, while those with “well-understood risks” experiencing stable to possible soft renewals.

Aon warns that a “single major incident could harden the market quickly” especially in light of the high level of claims prior to 2011.

“It is relatively easy for an underwriter to maintain a presence in the airline insurance market without committing capacity,” says Aon. “As a result, in the event of a major loss, any market hardening is likely to be short lived because the reintroduction of latent capacity will increase competition and reduce prices.”

Aon notes that one major driver of change in the airline industry is the consolidation of the airlines, many of which have consolidated inEurope.

The broker says the number of airlines dropping below the fleet value of $150 million—which is the threshold for inclusion in Aon’s data—has been greater than the number entering the market. Overall, the number remains not “significantly higher than average.”

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