Airline losses low in 2011 with market yet to reach bottom-Willis

According to the monthly Airline Insurance Insight, losses for the first six months of 2011 stood at just $400m. It is the lowest total for six years. There have been just five losses in excess of $10m, with no losses in excess of $50m, said the broker.

The report says that the insurance market has remained remarkably stable for airlines in 2011, with no change in the drivers of capacity and claims.

“If the next few months see no major deterioration in the loss position and no withdrawal of capacity then underwriters will feel increased pressure in the final quarter to further reduce not only rates, but premiums levels. This remains a catastrophe business, and much can happen, but if we are looking at when the bottom of the cycle will be reached it seems increasingly likely that we are not there yet,” said Steve Doyle, Business Development and Sales Director for Willis Aerospace.

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At the half-year stage, the market has generated less than $0.25m of additional premium, noted Willis. Despite the lack of additional premium, fleet values have increased by 7%, while passenger exposure has increased by 11%.

Certain programmes have experienced renewals that go against the norm, said Willis.

Some received premium increases in excess of 100%, largely as a result of losses on the expiring policy. Other programmes received premium reductions in excess of 25% thanks to dramatically reduced exposure.

The top 50 airline insurance programmes by passenger numbers continue to demonstrate the value of economies of scale, noted the broker. They received an average premium reduction of 5%, against above average exposure increases of 11% in both fleet value and passenger numbers.