Aerospace insurance figures hint at softening market in 2007

Results from the final quarter in the aerospace insurance market hint at a softening market in 2007, according to Aon.

Aon's Aerospace Insurance Market Review of 2006, said that while aerospace insurance market hardened slightly during 2006, results from the final quarter suggest that there may be a softening over the next year in the traditionally stable market.

The review said aerospace companies are unlikely to witness the significant declines in lead premium of 17% enjoyed by airlines but they have still benefited from the same factors of plentiful capacity and few claims, thus receiving average increases of just 3%.

The key findings of the review are:

there was a fairly even split in how the insurance markets treated the regions, with Africa and the Middle East witnessing average increases of around 10%, Europe and the Americas receiving only low single digit increases of around 1-3% and Asia falling in between at 6%;

the market continues to reward scale, with only operations that buy liability limits of more than $2bn enjoying an average lead premium reduction during 2006;

the manufacturing sector, which dominates the aerospace industry, continued to suffer from the knock on effect of increased US casualty claims in other sectors. It saw premiums rise by the highest rate among the three industry sectors (manufacturers 5%, service providers 4% and airports 2%).

Evidence from the last quarter of 2006, when average rate increases began to slow, suggests that the market will soften for all regions during 2007. This may even extend into 2008 unless there are significant losses in the aviation industry or a contraction of capacity as a result of underwriters merging or reducing their activity in the aerospace market.

Steven Doyle, spokesperson for Aon's aviation team, said: “Although some of the themes are the same, the aerospace insurance market continues to plot a divergent course to the airline insurance market. Rather than underwriters imposing blanket rate increases, they are increasingly making technical risk assessments to judge the aerospace sectors and individual companies on their own merits. This is improving the position for businesses across the industry.”

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Hosted by comedian and actor Tom Allen, 34 Gold, 23 Silver and 22 Bronze awards were handed out across an amazing 34 categories recognising brilliance and innovation right across the breadth of UK general insurance.