January 1, 2008 by Canadian Underwriter
Average hull and liability lead premium for airline insurance has fallen by over 15% during the first nine months of 2007, according to Aon’s Airline Insurance Market Review: Pre-Renewal Season 2007 report.
These reductions began in the final quarter of 2006.
Of the 112 programs for which Aon had access to renewal data, 68% saw their hull and liability premium fall by over 10% down to 55%.
“The high level of reduction is likely to be making a number of insurers take a second look at their commitment to the airline insurance market,” the report notes. “A reduction in capacity would lead to a hardening of the hull and liability premium market, although this may not happen until the 2008-09 renewal period.”
Total number of losses means the total insurable value of the airlines losses is higher than both 2006 and the 10-year average, the report reads. But, the soft market conditions continue and there has not been a market challenging loss.
“Although falling prices are generally a good thing from an insurance buying point of view, underwriters are increasingly under pressure,” Doug Peterson, chairman of Aon global aviation writes in the report’s foreword. “The consistent nature of the reductions are now bringing us to the point where the market begins to lose money, and when that happens, capacity is likely to contract and prices will climb as a result.”