NU Online News Service, Sept. 25, 1:40 p.m.EDT

Airline insurance placements saw their third straight month ofpremium increase pointing to an increasingly hardening market inthat sector, Aon insurance brokerage said.

The Chicago-based firm's aviation and aerospace divisionreleased a report saying that, despite variance in a few placementsduring the month of August, the overall trend for the past threemonths continued in the upward direction. Over the last threemonths average lead hull and liability premiums have increased bymore than 20 percent, Aon said.

The increases reflect a "tougher stance that the insurancemarkets have been taking after what looks like to have been twoyears with little or no profit," the report said.

The high level of losses so far this year have reinforced thecarriers' position, Aon continued.

To date, the 2009 loss figure, excluding minor losses is $1.51billion compared to $574 million for the same period last year, Aonsaid.

"Given the high level of losses in 2009 and the plummeting priceof insurance during the middle of the decade, it seems only naturalthat the cost of insurance is rising," the report said. "Very feworganizations will be able to avoid this economic reality, nomatter how painful it is to the bottom lines that are alreadywilting."

Aon noted that the final cost of an airline insurance policy maybe even higher than what it is reporting because the report is notinclusive of all the layers of coverage. Because of this, the "truemarket price of airline insurance is rising more quickly than ourdata suggests."

Capacity remains available, Aon said, and more may begin to moveback into the marketplace as prices increase.

In addition to the insurance increases, passenger numbers aredown, Aon said, falling by 10 percent so far this year. The world'smajor carriers are being hit particularly hard by the recession asit affects traveler's pocketbooks.

"The industry is not expected to recover for some time, but anumber of airlines are continuing to review their fleets at thesame time as reducing capacity by retiring older, less efficientaircraft," Aon pointed out.

The retirement of older aircraft would be a positive forinsurers because it would mean newer, potentially safer aircraftare being flown by the airlines.

However, the changes could also reduce airline fleet values, Aonnoted, which means underwriters will still be pressured to meetpremium targets.

Studies show that the rate of decline in passenger and cargonumbers has slowed, but the airline industry continues to suffer.Aon predicts that "It will be some time before there is enougheconomic confidence for the airline industry to enter a period ofrecovery."