Despite aviation being a catastrophe market, the high level of claims is the result of a fairly consistent level of losses throughout 2007, rather than a single major loss. This has come after a number of years where the frequency of claims has been relatively low globally, a factor that has attracted a great deal of insurance capacity to the airline markets as global underwriters have looked to diversify their portfolios.
As a result of the imbalance between premium and claims, Aon expects there to be additional focus on airline insurance portfolios within the market during 2008. There is unlikely to be a rapid reduction in underwriting capacity as a result of one poor year, but if the trend extends into a second year, it may become a significantly tougher market in 2009.
"These preliminary results end a fascinating year in the airline insurance markets," said Doug Peterson, chairman of Aon's Aviation & Aerospace division. "The first three quarters saw significant premium reductions on programms with good loss histories, while at the same time exposures of many airlines grew. As the level of losses has crept up, the market has seen the possibility of an unprofitable year and insurance prices have become less soft in the final quarter as a result. Capacity remains high and the aviation industry is still very much safer than it was even ten years ago, so we do not expect capacity to plummet overnight."
About Aon
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Through its 43,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions.