Tough Flying for Air Insurance Market

The high level of hull and liability claims, at $1.7 billion, coupled with the lowest amount of lead hull and liability premium since 2000 ($1.5 billion), means that the airline insurance market was broadly unprofitable in 2007. The negotiating process is likely to be tougher in 2008 as a result, according to Aon's Airline Insurance Market Review of 2007 (www.aon.com). This is the key finding of the review that brings together data for the last year and extrapolates its likely effect on the market in 2008 and beyond.

The reviews findings include:

* Total recorded lead hull and liability premium for 2007 was $1.5 billion, a reduction of 30 percent since 2005;
* Total incurred claims, including hull, liability and an estimate attritional losses, amounted to $1.7 billion;
* North American fleet values, at $192 billion, fell below those of Europe and Asia, both at $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.

Having started the year 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.