Kevin O'Toole/LONDON

Aviation insurers are again warning that they face a serious shortfall for 1997 following estimates which have put the cost of losses at close to $1.4 billion, despite a relatively encouraging year for air safety.

The preliminary year-end figures from the UK Airclaims consultancy, widely used throughout the main London insurance markets, suggest that while the losses for the year will be less than the $1.6 billion in losses chalked up in 1996, it will still go down as the fourth worst on record.

The figures come despite an apparent levelling-off in the number of accidents. Passenger fatalities, at 1,056, were down by more than one-third on 1996 and almost exactly on average for the 1990s. Aircraft losses were also close to the average, including the write-off of 22 Western-built jet airliners.

The cost of losses, however, has continued its upward trend, with even partial damage resulting in potentially heavy claims. Repair to the Virgin Atlantic Airbus A340-300 which landed at London Heathrow with only one set of main landing gear deployed is put at about $29 million.

"The worry for underwriters is that if 1997 is a relatively good year for air safety, what happens if there is a bad year?," says Graham Nichols, managing director of London's Westminster Aviation Insurance Group.

At the same time, an excess of underwriting capacity has continued to drive down airline insurance rates and Nichols believes that overall premium income will be "significantly below" the level of claims for 1997, with the market adrift by as much as 30%.

The downward spiral in rates seems to have continued throughout the year. Insurance broker Willis Corroon estimates that rates for hull cover were down by about 30% and liability by close to 25% during the crucial year-end period, which is when the bulk of the world's airlines renew their premiums.

Source: Flight International