Airline Insurance Market to Post Loss for Year; First Since 2000

The airline insurance market this year is expected to post its first loss since 2000, according to preliminary data collected by the Aviation & Aerospace division of Aon Corporation.

Aon reported that forecasts suggest the total hull and liability premium in the market will be approximately $1.46 billion for 2007, but the level of losses indicates claims will be at least $1.53 billion.

The company said the industry’s high claims numbers are the result of a fairly consistent level of losses throughout 2007, rather than a single major loss. This follows a number of years where claims frequency has been relatively low globally, which attracted a great deal of insurance capacity to the airline markets as global underwriters looked to diversify their portfolios.

As a result of the imbalance between premium and claims, Aon expects there to be additional focus on airline insurance portfolios within the market during 2008. There is unlikely to be a rapid reduction in underwriting capacity as a result of one poor year, but if the trend extends into a second year, it may become a significantly tougher market in 2009.

Doug Peterson, chairman of Aon’s Aviation & Aerospace division, said in the announcement that capacity remains high in the market and it is not expected “to plummet overnight,” despite the increase in claims.

Further details and commentary can be found in Aon’s Airline Insurance Market News, December 2007, www.aon.com/aviation.

Source: Aon Corporation