Airline risk managers say they plan to purchase environmental pollution risk policies over the next three years, trumping other risk transfer concerns, according to a broker's survey.

Chicago-based insurance broker Aon's London aviation office released its airline risk management survey where it questioned over 45 of the world's leading airlines on how risk management evolved during 2006.

Among the findings:

o Environmental pollution is the risk that most organizations expect to purchase a policy for over the next three years, rising from sixth place in the 2005/2006 survey. Aon said the result reflects the current focus on corporate responsibility in the airline industry.

The change knocked computer crime insurance into second place, while business interruption climbed to third.

o Aircraft accident, aircraft-related war/terrorism and property (damage) remain the three highest risk management priorities.

o Premium costs remain the key insurance industry issue for the majority of respondents, while transparency has fallen in importance below financial strength and claims services.

o The average length of risk strategies has decreased to 2.5 years from the 3.3 years reported in the 2005/2006 survey. This reflects the rapid evolution of the industry and the need for flexibility to take advantage of future opportunities, the broker said.

o Reflecting the larger organizations that responded this year, operations with companywide risk management strategies rose from 67 percent in 2005/2006 to 86 percent in 2006/2007.

o Risk management budgets fell to 1.6 percent of total revenue in the 2006/2007 survey from 2.1 percent in 2005/2006, reflecting the soft market conditions in the airline insurance markets.

"This is a fascinating snapshot of how airlines' perception of risk is changing year on year," observed Steven Doyle, spokesperson for Aon's aviation team. "The survey shows how issues such as the environmental debate and fears about cyber-crime impact the aviation industry and its insurance markets."

He added, "It also highlights how the significant reductions in average lead hull and liability premium since September 2006 are translating onto organizations' bottom lines. There is a wealth of information here that the insurance industry can use to ensure its products are closely aligned to airlines' risk requirements."

Special Reports /

Environmental Risk Trumps Others For Airline Carriers

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