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Airline Insurance Premium Swings by 18% In 2008, Aon Report

Source: AON

Posted on 20 Mar 2009

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According to Aon's Airline Insurance Market Outlook 2009, after five years of competitive market conditions, airlines around the world saw their lead hull and liability premium increase on average by 7% in 2008. Following the 11% decline in 2007, this means that the market swung by 18% in the last two years and the tougher conditions are likely to continue in 2009.

Total lead hull and liability premium rose from $1.51 billion in 2007 to $1.60 billion in 2008, while insurers are estimated to have paid out $1.45 billion in claims. Many underwriters are likely to have made a loss in 2008 however, as a result of a variety of factors including fixed and reinsurance costs, and will be under further pressure in 2009 as capital providers scrutinize their current level of investment.

The report brings together the data for the whole of 2008, offering insights into how the market will evolve in 2009.

Among the key findings are:

· In 2008, 63% of airlines received an increase in their lead hull and liability premium, compared to 28% in 2007;

· Fatalities related to airline incidents in 2008 were at their lowest since 2004 and the third lowest since 1995;

· Total hull and liability claims were fractionally below the long term average and around 25% below the 2007 total;

· Average fleet values in Asia became the largest in the world in 2008, while North American fleet values shrunk.

“The market appears to have passed the low ebb it reached in 2007 when total lead hull and liability premium fell to around $1.5 billion, down from over $2 billion two years before. Underwriters are now driving to sustain the premium increases in order to ensure profitability,” says Simon Knechtli, Aon Global UK Aviation & Aerospace Practice Leader. “The challenge for airlines in 2009 is going to be ensuring efficient and cost effective insurance and risk management programs against a backdrop of falling consumer confidence and revenues.”