Airline Industry Premium Up 20% In '09; Expected To Slow

NU Online News Service, April 16, 11:10 a.m. EDT

The airline industry paid about 20 percent more on average for lead hull and liability prices in 2009, but those increases are expected to slow, thanks to an improved economic picture for the insurance industry, according to a report from Aon.

Chicago-based insurance broker Aon Corp. released its airline insurance market outlook report for 2010, saying that while the industry experienced double digit increases, those increases were not enough to cover the "significant claims that occurred during the year."

Because of the improved economic conditions for the insurance industry, and a loss history that has been "relatively good" for the past five years, the industry should experience a slow down in the increases, the report said.

Lead hull and liability premium reached $1.9 billion in 2009, an improvement from $1.6 billion in 2008. There were, however, $2.3 billion in claims last year, compared to an average of $1.8 billion between 1998 and 2008.

Aon noted that on a positive note, there were only 58 major losses compared to a long term average of 68. Total fatalities for the year were 423 compared to an average of 635.

Fleet values in 2009 grew by 3 percent on a year to year basis, while average passenger number fell by 2 percent.

Premium growth was the highest in the Middle East, which also had the highest levels of exposure growth. Operations in North America are forecasted to experience reductions in both fleet value and passenger numbers, Aon said.

The report noted while others are seeing downward pressures, the Middle East continues to see growth in its airline industry. Average fleet values are expected to grow by 12 percent during the 2009-2010 policy period and passenger numbers are expected to increase by the same rate. Policy premiums rose by 32 percent for the same period.

Capacity is expected to increase as more insurers are enticed into the marketplace. Aon warned, however, that there could be a quick pull back if claims in 2010 look to be above the long term.

A copy of the full report can be found at www.aon.com.