Cost of insurance stabilising in real terms despite rate hikes

Airlines that renewed their lead hull and liability insurance programmes between January and July 2010 saw a 7% premium increase on average compared with last year, according to broker Aon's airline insurance market indicators report for 2010-11.

However, the broker added that while more than 60% of the airlines that have renewed their programmes so far have paid an increase in premium, this was fewer than the 80% seen in 2009, suggesting the cost of insurance for airlines is stabilising or even falling in real terms after 11 straight quarters of increases.

Aon's report analyses airlines with an insured average fleet value equal to or greater than $150m that have been placed in the first seven months of the year.

Simon Knechtli, aviation leader at Aon Risk Solutions said that although the industry has experienced significant losses in the last few months, the appetite for airline risk remains buoyant in the insurance market.

“Underwriters are competing for their desired market share and the strength of this competition has blunted the aspiration for higher prices as shown by the statistics in this report," he said. "We expect this to continue for the remainder of 2010, with further capacity entering the market in October and little evidence at this stage of anyone leaving,”

The report found that Africa saw the largest regional increase in average lead hull and liability premium, with a hike of 36%. Premiums increased by more than 10% in Latin America, 5% in the Middle East

Aon's report also said that confidence is returning to the industry, with airlines predicting a 13% increase in passenger numbers in 2011. This is in contrast to a 9% decrease predicted at the same time last year.