Aon Predict Loss In Airline Insurance Market

by Stewart Douglas

Story link: Aon Predict Loss In Airline Insurance Market

Insurance group Aon has today forecast the the airline insurance industry as a whole will report a loss for the first time in over seven years, based on figures released today by the Aviation & Aerospace division of the Aon business as a result of lingering problems within the market.

After the majority of the year’s trade so far, liability premiums are up to $1.46 billion. However, it is also thought that losses for the year overall will come to $1.53 billion by the end of 2007, which would in turn result in a loss for the industry overall which has been hit by the credit crunch and market externalities and their effect on the airline insurance market.

Whilst the industry will likely report a loss, it is thought that the overall effect will not be to reduce underlying underwriting capacity, with the prediction that the market will come further to the fore over the course of 2008.

After years of low claims values across the industry, this year has been heavily impacted by a raft of incidents leading to accelerated claims above the total of written premiums which will result in the loss overall.

According to Doug Peterson of Aon, the past year has been an intriguing one for the industry as a whole which will guarantee a busy year over 2008. “These preliminary results end a fascinating year in the airline insurance markets. The first three quarters saw significant premium reductions on programmes with good loss histories, while at the same time exposures of many airlines”,

“As the level of losses has crept up, the market has seen the possibility of an unprofitable year and insurance prices have become less soft in the final quarter as a result. Capacity remains high and the aviation industry is still very much safer than it was even ten years ago, so we do not expect capacity to plummet overnight.”

It remains to be seen whether the predictions will come to fruition, and whether the industry will continue to report losses over the course of the next twelve months.