NU Online News Service, July 8, 3:12 p.m. EDT

Aviation insurance rates are softening, showing signs ofmoderation after hardening last year, according to a reportreleased by Aon Corp.

The Chicago-based insurance broker's assessment for Julyrenewals said based on 16 of 35 expected renewals for the month,"the airline insurance market is softening."

Aon said current data indicates average fleet value andpassenger numbers have increased in line with the year-to-datetrend. Despite this growth, premiums remained flat for the month,"suggesting in real terms the cost of insurance is actually fallingin many cases," the broker noted.

Fleet value was up 12 percent for July and has grown by 7percent for the year so far. Passenger movement showed a 9 percentincrease for the month and 11 percent total for theyear-to-date.

While premium was flat for the month of July, overall premiumhas risen by 5 percent for the first six months of the year.

July is considered the second most active month for renewals,representing 17 percent of renewals in 2009 and 13 percent of totalannual lead hull and liability premium.

However, Aon cautioned that despite July's prominence in therenewal cycle, it does not necessarily indicate premium trend forthe full year.

Concerning loss trends, current figures show a dramaticturnaround from last year. So far this year, losses stand at $458million compared to $1.3 billion at the same time last year.Including minor losses, overall loss is estimated to be $733million compared to $1.59 billion last year.

Aon noted that last year's number includes the June loss of anAir France jet that greatly affected the loss figures.

The year is 10 percent below the 1996-2009 average, and if thetrend continues, total claims could come in at around $1.5 billion,significantly below the $2.3 billion for last year.

The industry segment is expected to collect $2 billion in leadhull and liability premium for the year, improving the underwritingperformance.

However, the losses the business suffered over the past threeyears means an unlikely return to soft market conditions andinsurers are expected to hold prices for some time, Aon said.

Aon also noted that "it only takes a relatively small number ofincidents in the airline industry for the loss levels to risesignificantly."