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Wednesday 14 September 2011
Author: Russell Group

While the market has been debating its worst year in history for catastrophe claims the airline industry has seen losses hit a five-year low.

To the end of the third quarter losses for the airline industry stood at $794 million, according to the latest data from the Aerospace division of global broker Willis Group.

Willis’ monthly Airline Insurance Insight report indicates that the insurance market has remained remarkably stable, with no change from the drivers of capacity and claims. The lack of fatalities in the three major losses that did occur in July reflects excellent safety performance of the industry, which has delivered some good fortune for underwriters in the wake of an extremely volatile year for other industries.

Commenting on the report, Steve Doyle, Business Development and Sales Director for Willis Aerospace, said: "With the current neutral market situation there appears to be a repeated clamour to understand the ramifications whenever a loss occurs. It must be remembered that responding to losses is the function of the market. The market is there to service the needs of an increasingly exceptionally safe industry and, therefore, needs a shift in overall trading conditions to significantly change."

Despite the healthy climate, July was one of the busiest periods of the year in the airline insurance market, according to Willis. The renewals again witnessed the trend for low single digit premium increases against higher levels of exposure sectors.

One positive result is that increased exposures do not directly translate into claims, though Willis observes that the flip side from an insurer’s perspective is the market has been unable to translate that growth into comparable premium volumes. The most influential market factor remains the level of capacity, which does not look set to diminish any time in the near future.

The three major losses that occurred in July represent a continuation of the trend for high valued hull losses. While this type of loss is a direct drain on the cash reserves of underwriters, it also provides some certainty on liability.