Increase in lead hull and liability premium: Aon

Lead hull and liability premium increased on average by 7% in 2008, after five years of soft market conditions, according to an Aon report.
Following an 11% decline in 2007, the market swung by 18% in the last two years, according to the report, Airline Insurance Market Outlook 2009.
The report goes on to say that the tougher conditions are likely to continue in 2009.
Total lead hull and liability premium rose from US$1.5 billion in 2007 to US$1.6 billion in 2008, the report notes.
Insurers are estimated to have paid out US$1.45 billion in claims in 2008, compared to US$1.97 billion claims payments in 2007, the report notes.
This would suggest that in 2008, the market made a profit of around US$149 million. But, underwriters are cited in the report as saying, “they will suffer an overall loss when costs, such as fixed and reinsurance, are taken into account.
“As a result, they suggest that the overall figures shown in this review do not accurately reflect their true position for the year.”
The report estimates writers of major airline risk business have on average spent between 15% and 20% of net income on reinsurance protection.
Using 17% as a middle ground for reinsurance costs (US$272 million) and an estimated fixed cost of roughly 10% of the 2008 net premium (US$160 million), it was determined that market income would equate to around US$1.17 billion.
Subtracting the claims cost of  US$1.45 billion from the adjusted market income would result in a net loss of US$284 million for the underwriting market, the report notes.