The crash of an Asiana Airlines Inc. (020560) Boeing Co. (BA:US) 777 plane in San Francisco won’t stem a long-term trend of falling airline insurance premiums, reinsurance broker Willis Group Holdings Plc (WSH:US) said today.
The July 6 crash, which resulted in three deaths after the twin-aisle airliner struck a seawall short of a runway, slammed into the ground and spun off the tarmac, “will do little to alter the downward trend in premium prices in the airline insurance market,” Willis said today in a statement.
Insurance rates have been declining with airline claims for more than three years because of fewer aircraft accidents, insurance broker Aon Risk Solutions said in May. Crash rates last year fell to 0.20 accidents per million flights from 0.37 a year earlier, according to the International Air Transport Association, which reported no losses of aircraft due to accidents among its members last year versus 0.41 per million flights in 2011.
“At this point, it is difficult to see how a single catastrophic event could reverse this prolonged period of rate softening,” Phil Smaje, head of the reinsurer’s Willis Aerospace division, said in the statement.
Losses in the first half of 2013 totaled about $488 million, while premiums in the period fell 5 percent, equivalent to an industrywide decline for insurers of $13 million, Willis said. Average insurance costs per passenger declined 12 percent, it said.
“The low loss levels combined with abundant capacity and growth in exposures continues to provide perfect conditions for buyers and challenges for underwriters,” Smaje said.
Compounding the downward pressure on insurance prices are new providers that have “served to further increase competition and drive premium prices down,” he said.
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