Airline prices flying high

Airline insurers earned $1.9bn in hull and liability premiums in 2009, a 20% rise, but claims for the year totaled $2.3bn, according to a broker’s market outlook. That means airline underwriters are likely to have suffered a third consecutive year of losses.

The result, according to Aon, is that hull and liability premium prices are likely to continue to rise in 2010, although the rate of increase could stall with new capacity.

"The airline industry endured a very difficult year in 2009 from an insurance point of view, with the high level of claims adding to an already challenging position as a result of rising insurance costs," said Magnus Allan, an aviation analyst in Aon Global Aviation Group.

Allan added: "The signs are that the position should improve in 2010 as a result of exposure reductions and the slightly improved economic conditions meaning that there is less pressure on global insurers. Prices in the airline insurance market are still likely to increase as a result of the 2009 losses, but the rate of increase should slow unless there are catastrophic losses."

Among the report’s key findings are:

• 2009 was one of the most expensive years in the recent history of the aviation industry, with US$2.3bn of claims (including an estimate for minor losses). This compares to an average of US$1.8bn between 1998 and 2008 (including 9/11);

• There were only 58 major losses globally, compared a long term average of 68;

• Total fatalities for the year were 423, compared to an average of 635;

• Lead hull and liability premium grew by the highest rate in the Middle East, which also forecast the highest levels of passenger and fleet growth, both 12%;

• Operations in North America forecast reductions in both fleet value, -3%, and passenger numbers, -5%. European operations forecast fleet increases of 2% and passenger reductions of 1%.

To read the full report, please follow this link: Airline Insurance Market Outlook 2010.