Aon’s “Airline Insurance Market Review of 2007” cites the “high level of hull and liability claims, at US$1.7 billion, coupled with the lowest amount of lead hull and liability premium since 2000 (US$1.5 billion),” as the reason the “airline insurance market was broadly unprofitable in 2007.”
As a result the “negotiating process is likely to be tougher in 2008,” said the report.
Based on this key finding, the review “extrapolates its likely effect on the market in 2008 and beyond.” Aon also noted the following:
— total recorded lead hull and liability premium for 2007 was US$1.5 billion, a reduction of 30 percent since 2005;
— total incurred claims, including hull, liability and an estimate for attritional losses, amounted to US$1.7 billion;
— North American fleet values, at US$192 billion, fell below those of Europe and Asia, both at US$193 billion, for the first time in 2007. North American passenger numbers, however, were still higher than the other two major aviation regions;
— the proportion of passengers travelling with flag carriers has fallen from 66 percent in 2005 to 48 percent in 2007.
Aon also indicated that, although the 2007 began with “average premium reductions of around 20 percent, the airline insurance market became gradually less soft as the year progressed with underwriters recognising the probability that the value of hull claims would outweigh the total lead hull and liability premium.”
Doug Peterson, Aon Aviation & Aerospace group practice leader, commented: “After four years of soft markets, it looks like 2007 may well have seen the cost of airline insurance reach something of an equilibrium.
“Despite the relatively high number of hull losses in 2007, there were fewer fatalities compared to the average over the last decade. Capacity continues to be high, but it seems unlikely that providers will continue to offer the high level of reductions witnessed over the last couple of years. As a result, 2008 looks set to be a fascinating year in the airline insurance markets.”
Download the report at: www.aon.com/aviation
Source: Aon
Topics USA Pricing Trends Aviation Market Aon
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