Broker Aon warns that although accident rates and insurance premiums are down, fatal hull-loss payouts are rising
Aviation insurers are increasingly concerned at the rising cost of claims, despite 2004 being the safest year ever in terms of hull losses and fatalities, according to broker Aon.
Although 15 hull losses were recorded last year – well below the 1990s' annual average of 22 – the total cost of claims in 2004 rose to $1 billion from $804 million in 2003, according to Aon's 2004 Airline Insurance Market Review.
Aon aviation and global aerospace practice group manager Steve Doyle says the cost of claims, in general, is increasing, although the latest statistics serve to highlight the different kinds of losses.
The most expensive loss of 2004 for insurance companies was the 19 October Corporate Airlines BAe Jetstream 32 crash in the USA which killed 13 people, while the second-largest loss in financial terms was the Flash Airlines Boeing 737-300 crash in Egypt on 5 January, which killed 148.
Doyle says the fact that the severity of claims has increased compared with 2003 "is clearly of concern to the insurance industry, though we expect market conditions in 2005 to remain stable barring any significant change in the level of losses". So far this year, "conditions remain consistent with 2004", he says. However, the Aon report warns "what still remains unclear...is the market's ability to cope with a catastrophic accident, given its recent low loss-level history".
While current figures take into account recently introduced safety systems, such as terrain awareness warning and airborne collision avoidance systems, "they do not guarantee future low loss records, with one fatal crash potentially doubling the losses in a year", says Aon.
Aon says the first insurance policy incorporating the Airbus A380 will be placed in the fourth quarter of this year by its client, launch airline Singapore Airlines. Policies allowing for the ultra-large airliner will represent peak exposures in both hull values and seating capacity in a single aircraft, at about 30% higher than the Boeing 747-400, says Aon.
Insurance companies reduced their renewal premiums by an average of 7% in 2004 compared with the previous year as insurers competed for business, but premiums still outweighed claims by nearly $1.4 billion in 2004, says Doyle.
HELEN MASSY-BERESFORD/LONDON
Source: Flight International
