NU Online News Service, Nov. 29, 3:25 p.m. EST

The aviation insurance market is showing signs of softening despite this year being on track as one of the costliest loss years in history, according to a report from Aon Risk Solutions.

In its December report, Aon Risk Solutions, a subsidiary of Chicago-based insurance broker Aon Corp., said that while overall premium numbers point to a hard market, the fact that only eight of 22 renewals during the month of November experienced increases points to a market that is in the process of softening.

Aon said the 19 percent average premium increase was borne by three airlines that "either had losses, come of group insurance programs or both."

Setting those three aside, lead hull and liability premium price would have fallen 12 percent in November and grown by 4 percent during the year.

"While the underlying position appears increasingly soft, airlines are being assessed on their own merits, and those with losses are enduring significant price increases despite the prevailing trends," the report said.

If the current direction of the market continues, lead hull and liability premium for the year should total around $2 billion, but claims should reach around $1.9 billion if there are no further major losses.

"Taking into account fixed and reinsurance costs, this means the airline insurance market has not achieved a return for four years," the report said.

Aon added that if the market is softening through the renewal season, then the $2 billion the industry will collect in premium could be "somewhat optimistic."

On the loss side, the Nov. 4 engine failure on a Qantas A380 aircraft that forced the plane to make an emergency landing in Changi International in Singapore shortly after takeoff resulted in close to $70 million in damage to the engine and aircraft wing.

Aon said the current loss figure for this year so far, excluding minor losses, is close to $1.46 billion compared to $1.63 billion for the same period last year. Adding minor losses, it is estimated that overall loss is at $1.96 billion so far this year, compared to $2.09 billion last year.

"It should be pointed out that 2009 was one of the most expensive years in the airline industry from a claims point of view," Aon said.

Aon also noted that the risk profile for the industry is changing "from one of many relatively minor losses to few relatively major ones. This could imply that the industry's work to improve accident rates in emerging markets has been successful."

Special Reports /

Aviation Insurance Losses Grow As Market Turns Soft

Related Stories

Recommended For You