Airline Insurance Market Expected to Make First Loss Since 2000: Aon

CHICAGO and LONDON, Dec. 19 /PRNewswire-FirstCall/ -- The airline insurance market looks set to make its first loss since 2000, according to preliminary data collected by the Aviation & Aerospace division of Aon Corporation (NYSE: AOC). With more than 85% of the year's activity now completed, forecasts suggest that the total hull and liability premium in the market will be approximately $1.46 billion for the whole of 2007, but the level of losses will mean that claims will be at least $1.53 billion.

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Despite aviation being a catastrophe market, the high level of claims is the result of a fairly consistent level of losses throughout 2007, rather than a single major loss. This has come after a number of years where the frequency of claims has been relatively low globally, a factor that has attracted a great deal of insurance capacity to the airline markets as global underwriters have looked to diversify their portfolios.

As a result of the imbalance between premium and claims, Aon expects there to be additional focus on airline insurance portfolios within the market during 2008. There is unlikely to be a rapid reduction in underwriting capacity as a result of one poor year, but if the trend extends into a second year, it may become a significantly tougher market in 2009.

"These preliminary results end a fascinating year in the airline insurance markets," said Doug Peterson, chairman of Aon's Aviation & Aerospace division. "The first three quarters saw significant premium reductions on programmes with good loss histories, while at the same time exposures of many airlines grew. As the level of losses has crept up, the market has seen the possibility of an unprofitable year and insurance prices have become less soft in the final quarter as a result. Capacity remains high and the aviation industry is still very much safer than it was even ten years ago, so we do not expect capacity to plummet overnight."

Further details and commentary can be found in Aon's Airline Insurance Market News, December 2007, which is available at http://www.aon.com/aviation

About Aon

Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. Through its 43,000 professionals worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com.

Note to Editors: All figures detailed in this press release include all known information at time of production on the lead London terms of airlines renewing with fleet values in excess of $150 million. They do not take into account any coverage changes and are not weighted in any way with regard to the size of the airline's fleet or the volume of premium paid. Our loss information covers Western built equipment only and we only include losses with a total incurred loss of $1 million and above.

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