NU Online News Service, April 4, 2:53 p.m. EDT
Aviation losses were again above average in 2010, but that result will not necessarily translate into a hard market for aviation insurance, says insurance broker Aon.
The Chicago-based insurance broker released its "Airline Insurance Market Outlook 2011" report, noting that the airline insurance industry suffered $2.1 billion in claims in 2010, well above the industry average for claims of about $1.5 billion between 1996 and 2009.
For the year there were 601 fatalities, compared to the long-term average of 621.
Claims outpaced lead hull and liability premium of $1.93 billion. This was an increase over the previous year when premium stood at $1.84 billion.
At the start of the year, it appeared the industry was in store for a hard market as rate increases came in at 20 percent for the 2009-2010 renewal season. However, the 2010-2011 renewal season witnessed average increases at "a palatable" 4 percent increase, Aon says.
The report notes that airline insurers are relying on changes in risks and not overall market trends when making their pricing decisions. This is a change from two years ago when "overall market trends were a significant factor influencing the price of airline insurance," the report says.
The high level of claims could have an impact on pricing in 2011, the report says, but the current premium of $1.9 billion would be enough for insurers to "meet targets even once fixed and reinsurance costs are taken into account." It also notes that carriers are making money on their aviation books "even if combined ratios for their airline book are below par."
For 2011, Aon says it expects prices to continue to rise gradually as economies improve and more passengers take to the air.
"This time a year ago, we were talking about equilibrium in the airline insurance market, and it's a phrase that still has resonance," observes Simon Knechtli, head of Aviation for Aon, in a statement. "Whatever insurer aspirations for premium income, this is a true market that is reacting to the supply and demand of capacity. Where there will be volatility in the event of a catastrophic industry loss, a rise in prices will only attract further capacity, which will make any upturn short lived."
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