As a result, aircraft insurance premiums have been drifting south for more than a year, according to broker Willis Group, which reports $488m of insurance pay-outs this year, a figure that excludes the Asiana hull loss but is still low by historical standards.
“The low loss levels combined with abundant capacity and growth in exposures continues to provide perfect conditions for buyers and challenges for underwriters, with little sign of a change in any of the market drivers and as a result the downward slide in premiums looks set to continue unabated,” commented Phil Smaje, CEO of Willis Aerospace.
In 2012 there were only 39 insurance-triggering incidents, according to broker Aon, compared with an average of 70 per year over the previous 17 years.
This year, average airline insurance cost per passenger is down 12 per cent – the result of similarly sized erosions of hull and passenger liability rates.
Asiana’s 777 was reportedly insured for $2.3bn with a number of insurers, of which AIG had the biggest exposure at about $100m.
But even if another big airliner went down tomorrow, it would probably do little to halt the momentum of softening premiums, as the low frequency and severity of aircraft crashes in recent years has attracted more insurers to the market, giving airlines ample opportunity to shop around.
Sadly, passengers shouldn’t expect this buyers’ market to translate into cheaper tickets any time soon; insurance only comprises about one per cent of an airline’s total operating cost.