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Aon: Aerospace Insurance Costs Continue Steady Descent

Posted on 27 Apr 2010

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The price of insurance for the aerospace industry looks set to continue to decline in 2010, for the fourth year in a row, finds Aon's Aerospace Insurance Markets Outlook 2010 report. After 2009's turbulence, this represents an oasis of relative calm for airports, aerospace manufacturers and support companies.

2009 saw the continuation of decreasing of steady rates for insurance in the aerospace sector:

*Airports: 2% decrease in average cost of premium

Reduced exposure to risks, including falling passenger numbers have played a significant role in the recent premium reductions. Airports in the Middle East are the only ones to have bucked the trend with passenger numbers expected to grow by 11% during the 2009/10 policy period.

* Manufacturers: holding steady, no change in average cost of premium

Just over half of aerospace manufacturers are forecasting turnover reductions during the 2009/10 policy period. Maintenance, repair and overhaul (MRO) operations have a more positive view, with turnover expected to grow by 9% on average.

* Service Providers: 6% reduction in average cost of premium

The service provider sector, which is comprised of refuellers, ground-handlers, and airport service providers, saw a fall of 6% for the third consecutive year in the average cost of the premium they paid. Nearly 60% of refuellers forecast a reduction in the amount of fuel they are expecting to supply during the 2009/10 policy period.

* Age of global fleet: second oldest global fleet since 1989

The average age of the global fleet held steady at around 13.5 years old during 2009, the second oldest that the global fleet has been since 1989. This reflects falling order books for airframe manufacturers but also explains the positive turnover forecasts coming from the MRO sub-sector.

"The insurance renewals so far in 2010 indicate that we will see similar trends as 2009, although there is a slight chance that prices could start to rise minimally as the year progresses," observes Magnus Allan, an aviation analyst in Aon Global Aviation Group.

"Insurance prices are declining as a result of three factors. Primarily, capacity continues to be strong in the aerospace insurance market. The global economic conditions have also had a significant impact on the aviation industry as a whole, and exposures have declined as aerospace organizations have responded to the new realities. Finally, the sector has also been very proactive in its approach to insurance and risk management, as well as introducing a number of new technologies and approaches that have reduced the level of inherent risk."

To read the full report, please follow this link, Aerospace Insurance Market Outlook 2010, or go to