Aviation Loss Incidents Down, But Severity Is Up

According to Aon, while the introduction of safety initiatives are clearly reducing the number of incidents, the cumulative cost of those incidents to the insurance industry increasing.

Despite fears over the growing cost of claims, the airline insurance market remained buoyant with an average premium reduction of 7 percent in 2004 as insurers competed for business, the report found. It said market capacity continued to be adequate, despite the departure of one underwriting syndicate in 2004.

The outlook for the 2005 renewals is stable provided there is no significant change in the level of losses, the report said.

Commenting on the report, Steve Doyle, manager of Aon's Aviation and Aerospace Global Practice Group, said that while 2004 was the safest year on record in the aviation industry, the increase severity of claims made is clearly of concern to the insurance industry.

"We expect market conditions in 2005 to remain stable barring any significant change in the level of losses," he said in a statement.

Mr. Doyle said, "2005 will also see the first insurance policy placed for the Airbus A380, which in itself will represent peak exposures in both hull value and seating capacity in a single aircraft," said Mr. Doyle. "It will be interesting to see how the insurance market responds to this challenge."

The A380 is a twin-deck, four aisle jetliner, that Airbus said can accommodate 555 passengers in a three-class layout. The plane is schedule to enter service in 2006. Airbus is a European airplane manufacturing consortium based in Toulouse, France.