NU Online News Service, May 3, 2:50 p.m.EDT

Sof- market insurance conditions persist in the airlineinsurance marketplace, but risk appetite and exposures arefluctuating, masked by regional and corporate differences, says areport by Aon Risk Solutions.

Second-quarter results so far this year show that overall ratescontinue to fall while exposures climb.

An airline acquisition caused premium volumes to fall by 10percent year to date, the report says. Disregarding the insuranceprogram change from the acquisition, current average lead hull andliability premium rose by 1 percent.

Out of all programs placed this year, more than half experienceda reduction in lead hull and liability premiums, with severalseeing reductions of over 10 percent.

Capacity is suppressing high premiums by insurers, says theairline insurance report, and there is much competition forattractive risks. Insurers, however, are trending towards theirpreferred airline portfolios as opposed to the greater riskselection seen in 2011.

Renewal premiums moved down by 13 percent in April, when renewalpremiums were at $122 million, but are at $145 million and down by10 percent year-to-date.

Claims are currently lower than they were at this point in 2011,which was the lowest claims year in two decades. The most recentloss figure is $35 million in comparison with $65 million in April2011. Factoring in minor losses, the cumulative loss is now $235compared to $265 million year to date.

All surveyed insurers have a trading strategy in place for thebottom of the market cycle, the report continues. Shifting riskappetites mean that while some airlines find themselves with newcapacity on their hands, others are losing it.

Spanair, with 25 aircraft valued at over $1 billion, hasfolded along with seven airlines included in Aon's 2011 dataresults.

In North America and Europe, regional exposure is falling inresponse to economic challenges and cultural events. Nine carriersproject average fleet value increases of 10 percent or higher andmore than 60 percent of programs predict passenger increases.

According to the International Air Transport Association, globaltraffic rose by close to 9 percent in February 2012 and cargofigures climbed to 5 percent against the previous year. The strongfigures disguise factors which influence cross-global traffic, suchas the Arab spring, a postponed Brazilian carnival, and themid-winter Chinese New Year that deferred some deliveries untilFebruary, the report says.