The airline insurance market is now as hard as it has been since 2001, the year of the September 11 World Trade Center attacks, a new report by Aon reveals.

According to the report Airline Insurance Market News, October renewals so far (up to October 22) show a 25% increase on average in lead hull and liability premium. This was partly the result of fleet growth at two of the nine renewals that have been placed to date. When excluding these from the data, the average increase in lead hull and liability premium is 10%. A further nine insurance programmes are expected to be placed before the end of the month.

The September renewals suggested that the increases in lead hull and liability premium could be slowing, with average increases of 14%. This was the first time in four months that the average increase fell below 20%. In the year to date, however, average lead hull and liability premiums have risen by 18%.

Aon says the fourth quarter of 2009 is likely to be the eighth consecutive quarter of rate increases in the airline insurance market. It expects this trend to continue into 2010. By this measure, Aon says the airline insurance market is at its hardest level since 2001, with 78% of placements this year seeing an increase in lead hull and liability premium costs compared to last year. This compares to the situation in 2006, when only 22% of renewals received an increase.

The airline insurance industry has been hit by a number of large losses this year, which amount to $1.6m to date. This compares to $775m at the same point last year, and is more than 40% above the long-term claim average for a full year. Adding an annual pro-rata estimate for minor losses, the overall loss total is $2m so far in 2009, compared to $1.2m in 2008. Excluding 2001, this year is likely to be the most expensive year for insurers in the history of the airline industry.

According to Aon, there is a good level of capacity in the airline insurance industry, which is the main reason why the market has not hardened even more. However, it says there is a danger that capacity may decline if 2010 turns out to be a fourth year with little or no profit.