NU Online News Service, Dec. 5, 11:54 a.m. EST
After some initial signs of a market turn, airline insurance appears to be showing signs of continued softening as the bulk of the aviation industry seeks year-end renewals, says a report from Aon Risk Solutions.
The Chicago-based insurance broker's December Airline Insurance Market News report says lead hull and liability premium fell by 13 percent in November as the world's largest airlines begin their renewal process.
Overall, as of the end of November, premium rates stand at minus-3 percent with 141 renewals for the year. This compares to 6 percent increase for all of 2010 with a total of 224 renewals.
A significant drop in losses so far this year contributed to the softening prices. Last year there was a total of $1.5 billion in losses, excluding minor losses. So far this year, the figure stands at $481 million.
Adding minor losses, overall loss totals $1.03 billion compared to $1.96 billion last year.
Fatalities are also showing positive signs with a total of 175 lives lost that were covered under standard liability policies so far this year. This compares to the long term average of 582 fatalities. Aon also notes that this is the first time since 1995 that by Dec. 1 the number of fatalities has been under 300.
Aon cautions that "a single incident has the potential to significantly alter the claims profile of the year, even at this relatively late stage."
It is anticipated that nine airlines representing around $50 million of lead hull and liability premium are expected to be placed during December. The end of the year represents over half of the lead hull and liability premium that is expected to be renewed for the year.
Aon says underwriters that have fulfilled their annual targets in this market "can afford to be more selective in their participation" during this renewal period. This can translate into higher prices for insurance that is "closer to or even above the lead price."
Aon says the numbers may also be affected by a large group-insurance program in the Middle East that began at the end of last year. It "is likely to mean that results are slightly more erratic for the next couple of years as balance is achieved."
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