Fresh figures from insurance specialist Aon show airline premium levels dropped 11% last year making it increasingly likely the airline insurance sector made its first loss since 2000.

Airline insurance premiums were around 10% lower in December – the busiest single month in the airline insurance renewal period - in line with the slightly slower rate of premium reductions seen during the second half.

Premiums in the sector have been falling since the post 11 September 2001 spike in the market and preliminary figures show they have led to a loss in the airline insurance industry for the first time since 2000. Overall levels of lead hull and liability in the airline sector for 2007 are expected to be around $1.51 billion, while the amount of loses for the sector is estimated at around $1.7 billion.

“Organisations do not tend to remain committed to unprofitable markets for very long so if there is a reduction in capacity, the price of airline insurance may rise during 2008,” Aon says in its latest airline insurance report.

“Fundamentally however the airline industry and its insurance market is still sound and reasons that have attracted the high level of capacity over the last three years remain in place; technology, training and fleet improvements have all reduced the risk of an incident and minimised the effects of any incidents that do occur.

“The market’s participants are likely to use the quiet first quarter [of the renewal season] to reassess their positions, while maintaining a very close watch on the level of losses, in an attempt to gauge overall direction in 2008,” Aon suggests.

The estimated $1.7 billion figure for losses, including attritionals, saw the third highest value of airline losses since 1996 – excluding the 11 September terror attacks. It compares to $1.3 billion in 2006.

But Aon points to factors indicating the industry is still “potentially very safe in comparison with where it stood ten years ago”. It says the 2007 figure includes some incidents still under discussion by insurers and predicts the figure is ultimately likely to be slight lower.

It also points to only a relatively small rise in fatalities last year – 607 compared to 579 in 2006. “While the relatively high value of losses that have occurred is bad from an airline hull insurance point of view, the fact that the number of fatalities is so close to the 2006 totals suggests that the improvement in the way aircraft are operated, the technology that supports them and the training of staff that manage and maintain them continue to deliver results,” says Aon.

Source:'s sister premium news site Air Transport Intelligence news