Aon Study Concludes Airline Insurance Market ‘Hardening’

A bulletin from Aon’s London office concludes that the airline insurance market “is hardening for the first time in five years, with a five percent increase in lead hull and liability premium between January and July in 2008.”

Aon explained that the “vertical price gap between lead and following markets continues to close and underwriters have been taking a tough stance to renewals so far this year, a position that will continue for the rest of the year and probably into 2009.”

According to Aon the hardening in the market is mainly “being driven by the loss that underwriters suffered in 2007 as a result of the relatively high level of incidents coupled with the soft market conditions. Lead hull and liability premium prices fell on average by
11 percent in 2007 and 17 percent in 2006, so underwriters are increasing prices in 2008 to recoup their losses.”

Aon’s Airline Insurance Market Indicators Autumn 2008 brings together the data for the first seven months of 2008 and explains how underwriter’s attempts to boost their revenues will impact renewals during the final quarter when the majority of airline programs are placed. The document also features an enhanced losses section that looks at incidents between January and August broken down by region.

Aon’s “key findings” included the following:
— Between January and July 2008, only 34 percent of airline renewals received reductions in their lead hull and liability premium.
— During the same period last year, 72 percent of renewals received reductions.
— Total lead hull and liability premium for the year is expected to be between $1.49 billion and $1.6 billion, compared to $1.51billion in 2007.
— Despite the hardening insurance markets, loss rates in the industry are better than average, although a single major loss could change this position.

“As we suggested at the beginning of the year, the airline insurance market has become a much tougher place for airlines in 2008,” indicated Doug Peterson, Aon Aviation & Aerospace Practice Leader. “The challenge for the markets is that they are hardening at a point when the aviation industry as a whole faces a number of difficult economic challenges such as high fuel prices and wavering consumer confidence. We expect the final quarter of 2008 to present some interesting dynamics.”

The full report is available for download at: http://aviationinsight.typepad.com/aviation_insight/.

Source: Aon – www.aon.com