The record level of low claims in the airline insurance marketplace in 2012 is attracting more capital—which means favorable pricing for insureds with good safety records.

In a report, Airline Insurance Market Outlook 2013, Aon Risk Solutions says that premium for Hull and Liability insurance fell 11 percent to $1.6 billion in 2012, despite an average increase of 5 percent in fleet value and a 4 percent increase in passengers.

Claims numbers continue to keep the market soft, according to the report. Last year produced the second consecutive year of exceptionally low claims—around 70 percent below the long term average for the industry. The number of incidents in 2012 was 39, compared to an average of 70 over a 17-year period, and total insurable fatalities were 318, compared to the long-term average of 597.

Claims for major losses during 2012 totaled $324 million, 40 percent less than the prior year total of $522 million. Last year saw a single incident where the number of insurable fatalities was higher than 150, and no claim was valued at more than $50 million.

“Insurers breathed easier as every month passed without catastrophic loss and certainly, at the end of the year, they appeared somewhat surprised, if relieved, to be reporting profitable airline trading at least in the pure terms of premium versus claims,” says the report.

The report notes that with the industry's safety record, if there is a single major loss, there will be a price reaction, “but with all the capacity chasing airlines, it will be very short-lived.”

On the reinsurance side, average rates fell 7.5 percent on most sublines while rates on general aviation coverage was more in line with claims experience, says the report. Reinsures' appear headed to their best loss record in 25 years with virtually no major losses and no individual losses above $100 million.

Overall, for 2013, airlines can expect “very favorable renewal results” if claims remain exceptionally low. Insurers will seek to grow premium income and are beginning 2013 by offering greater capacity. The Lloyd's market may also reassert itself on risks it declined in 2012, as pressure builds to improve rate performance.

Aon says rates will shift to hard-market conditions when losses begin to significantly outstrip premium income. Given the current claim reality, “it will take a series of losses, or one very large loss in 2013, to create a change in current market trends.”

Special Reports /

Low Claims, More Capacity Keeping Aviation Insurance Buyer-Friendly

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