Ben Cook says Aon’s warning of hardening rates will add pressure to aviation cover.

The collapse of the XL Leisure Group will cost insurers £42m, some of which will be clawed back through an expected hike in aviation insurance premiums. The Civil Aviation Authority’s compensation scheme will be able to claim money from insurers that guaranteed a £42m XL bond the company was obliged to put up in order to renew its Air Travel Organisers Licence.

Aon says that although airlines’ lead hull and liability premiums reduced by 1% in August, it now will be difficult to get any cheaper deals.

Instead it warns that airlines that reduce the size of their fleet may not necessarily see a corresponding reduction in their insurance premium as underwriters are increasingly attempting to impose “minimum premium agreements” to guarantee a certain level of income, regardless of the size of the fleet or estimates of passenger numbers.

However, Aon figures reveal that, despite the collapse of XL and a number of other airlines this year, only $20m, or 1.35%, of the total amount of lead hull and liability premium has been lost.

Ben Cook is a freelance journalist.