NU Online News Service, Sept. 28, 4:14 p.m. EDT

The combination of slowing price increases among a decreased number of air carriers indicates that the airline insurance marketplace may be stabilizing overall, according to a report from Aon.

In its "Airline Insurance Market Indicators 2010/11" report, insurance broker Aon said lead hull and liability premiums have risen an average of 7 percent during the first half of this year compared to 2009. More than 60 percent of the renewals experienced premium increases in 2010 compared to 80 percent last year for the same period.

"The slowing level and falling proportion of increases suggests that the market is stabilizing," according to the report.

However, insurers could end up on the losing end for the year if the market does not harden considerably in the third quarter, Aon warned. Severe losses between May and August have exceeded average losses and any further losses could spell limited returns for insurers.

"This could potentially have a significant impact on capacity and pricing in 2011," the report stated, "although the ramifications appear to be limited at this stage."

Capacity is not an issue currently, as new underwriters were attracted to the business by the average 20 percent increase for lead hull and liability premium during 2009. But a high level of losses could test insurers' commitment next year, the report noted.

The number of incidents has been low this year, but the value has risen notably above the average, the report said.

There have been 23 incidents between January and August this year, compared to the long-term average of 42. However, total claims, excluding minor losses, came to $996 million, compared to the average of $612 million.

During the first six months of this year, Africa had the highest value of losses since 1995 at $359 million, compared to $52 million in long-term average for the region. There have been 174 fatalities, triple the long-term average of 56 for the region. These losses, however, were from just two incidents.

Asia also saw an increase in average losses, caused by just three incidents. Claims value stands at $225 million, while the average for the year is $269 million. Fatalities are up dramatically too, at 298 so far in 2010 compared to the long-term average of 171.

The report stated that if there are no more major losses for 2010, total losses including an estimate for minor losses comes in at around $1.8 billion, but premium for the year would stand at just over $2 billion.

"Taking fixed costs into account, this means that there is a very real possibility that the airline insurance market will make a loss for a fourth consecutive year," the report said.

Special Reports /

Aviation Market Stabilizing, But Large Losses Taking Toll

Related Stories

Recommended For You