May 12, 2004 by Canadian Underwriter
The average premiums facing the aviation industry dropped by 14% during the first quarter of 2004, says a new report by London-based Aon Ltd. While just 7% of the market renews in the first quarter, Aon says those airlines report rate declines across coverage lines.
Hull rates dropped by 10% on average, as did liability rates. Nonetheless, Aon notes, insurers remain focused on technical underwriting and market capacity has not increased. Insurers face a consolidating aviation market (many airlines are joining into consolidated insurance buying groups) where premium base is on the decline, while risks are elevated due to political and technical concerns.
However, 2003 and early 2004 have not produced high losses in the aviation field. “The year started with a number of fatal losses in the first few weeks,” the report notes. “These did not translate into significant insurance losses and a relatively safe latter half of the quarter has resulted in a lower loss level than the same period in 2003 the year that was hailed the safest in modern aviation history.”
Hull losses for the quarter were US$71.9 million, while liability losses reached US$77.0 million, for a total of US$148.9 million. This compares with US$239.9 million in insured losses in the first quarter of 2003.