Aerospace Insurance Continues Soft-Market Ride

NU Online News Service, Dec. 12, 1:56 p.m. EST

The aerospace-insurance market will continue its soft period as lead premium fell an average of 2 percent for 2011-2012 insurance programs, according to Aon Risk Solutions.

With a total of 218 renewals to date for the year, renewal premium dropped to $628 million, according to Aon's report, “Aerospace Insurance Market News.”

The market sector covers airports, manufacturers and service providers.

The data used covers 80 percent of the total lead premium expected to be placed in 2011. The report notes that while there is potential for the averages to “shift slightly, there is unlikely to be a significant change before the end of the year.”

Aon says that beneath the top-line data, there are significant differences between the main sectors of the aerospace industry.

The airport sector enjoyed rate reductions around 7 percent during the year while manufacturing premium rose 2 percent on average.

Aon notes that the driver of airport-insurance price reductions is the number of exposures, which was the principal driver during the recession. Despite improved economic conditions, economic concerns remain in Europe and North America, Aon notes.

The service sector saw lead premium rise for the first time since 2006. After consistent reductions of around 6 percent each year, prices are expected to rise 3 percent on average with 2011-2012 placements.

“Aerospace continues to be an attractive place for underwriters to do business,” says Aon in its report. “Despite annual premium falling from around $904 million for the market as a whole in 2006 to an estimated $760 million in 2011, capacity continues to be stable.”

Ample capacity is expected to “be healthy” through next year, says Aon.

The cousin of the aerospace insurance market, airline insurance, is expected to remain flat for the rest of this and see the same going in 2012, according to a previous report from Aon.