Airline Hull Cover Costs Decline Despite Accidents

The recent spate of airline accidents has not yet translated into increases in airline hull insurance, said an executive at Aon, out of London; however, the broker did not rule out increases for fourth-quarter renewals.

Aon said that four airline crashes in quick succession have brought to an end a long period of relatively benign loss experience for the aviation insurance market.

August is now the second most expensive month, in terms of losses, for the airline industry since January 2002, Aon said. Despite the losses, for aircraft hulls valued at over $170 million the monthly trend in the cost of losses has continued to fall steadily.

Aon said the overall loss profile for 2005 is still within the average for the last three years, both in terms of incidents with a value of loss over $50 million and incidents with more than 50 fatalities.

Recent years have represented the safest in airline industry history, Aon added.

"It is a testament to the work that the industry has carried out over the last decade that the cost of losses is still falling, despite the incidents that have taken place in August," said Steve Doyle, Aviation and Aerospace Global Practice Manager, Aon United Kingdom.

He added that, "Accidents are inevitable in this business, but the safety measures implemented are likely to continue to improve safety across the industry.

"With the airline insurance renewal season approaching, it remains too early to predict if these losses alone will result in changes to the current market environment. They are, however, likely to focus the attention of insurers as the critical fourth quarter approaches."

On Aug. 2, an Airbus 340 landed in bad weather in Toronto, Canada, and ran off the runway. All 340 aboard managed to get off the plane before it was consumed by fire. A Tunisian twin engine charter plane crashed off the coast of Sicily on Aug. 16, killing 13.

The two worst accidents this month occurred within days of one another when a Cypriot airliner, a Boeing 737, crashed on Aug. 14 in Greece, taking the lives of 121. Most recently, a Columbia airliner, a Boeing MD-82, crashed Aug. 16 in Venezuela killing 160.