Aon Aerospace Insurance Market Outlook
Confidence still limited for airports for 2010/11
Insurance prices continue to drift down
LONDON - The aerospace sector weathered the global financial crisis relatively well, but confidence is still in short supply, with passenger and revenue forecasts still relatively conservative, according to Aon Risk Solutions, the global risk management business of Aon Corporation (NYSE: AON). The findings are detailed in Aon’s annual report on the aerospace industry, the Aon Aerospace Insurance Market Outlook, 2011.
The sector is now in its fifth consecutive year of falling insurance premium prices, with preliminary data for 2011/12 renewals pointing to a continuation of the trend. The ongoing soft market is being driven by a variety of factors, with changing insurance strategies, falling exposure as a result of the global economic downturn and the industry’s evolving risk profile, all playing a role.
Airport operators enjoyed the best results from the insurance markets, with lead premiums falling on average by 7%. Service providers experienced an average of 5% reduction in prices, an impressive level of consistency after the 6% average reduction reported for 2007/08, 2008/09, 2009/10. Lead premium in the manufacturer sector was stable once again for 2010/11, reflecting the reduction in turnover caused by the global economic downturn, coupled with the overall perception of risk in the sector.
Overall, four of the five regions experienced lead premium prices fall on average, with only the Middle East going against the trend, although as the second smallest region in the world from an aerospace point of view, it is subject to the influence from changes at the region’s major operations.
“The insurance programmes placed for the aerospace sector so far in 2011 suggest a fifth consecutive year of the soft market,” observes Danny Green, head of Aon Risk Solutions’ aerospace team in London. “While the long term declines in premium levels would suggest that insurers will begin raising premium at some point in order to maintain profitability, there are several reasons why this may not happen in the short term. Over capacity attracted by the sector’s relatively good loss history, as well as reductions in exposure, or the actual volume of risks being insured, driven by the global economic conditions have meant that there is lower exposure to be covered. The long term improvements in safety that are being made by organisations across the sector are also a major factor. As a result, there will continue to be pressure on insurance prices.”
To read the full report, please follow this link, Aerospace Insurance Market Outlook 2011, or go to www.aon.com/aviationinsight.
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*Average cost of premium refers to the lead premium rate on a multi-layered policy, i.e. where the risk is shared by multiple insurers
Aon Corporation (NYSE: AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human resources solutions and outsourcing. Through its more than 59,000 colleagues worldwide, Aon unites to deliver distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon’s industry-leading global resources and technical expertise are delivered locally in over 120 countries. Named the world’s best broker by Euromoney magazine’s 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance’s listing of the world’s insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary 2007-2010, best reinsurance intermediary 2006-2010, best captives manager 2009-2010, and best employee benefits consulting firm 2007-2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United.
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