The value of airline insurance claims has overtaken premiums for the first time since 2010 and prices are set to continue to fall this year, according to Aon Risk Solutions annual report on the sector.
Aon's latest report found that global lead hull and liability premiums for 2013/14 reached $1.4bn, but this was exceeded by the value of claims, which stood at $1.5bn.
The factors driving falling premium prices included strong underwriting competition, a small number of claims and record low fatality levels, Aon said.
Its report stated: 'The difference between premium and claims was minimal, and the fact that it was driven by a relatively low number of large losses means that not all underwriters will have a negative result on their books. This means that while there is unlikely to be an instant hardening, there is likely to be increased scrutiny.'
Despite this imbalance, however, the report suggests that insurance premiums could continue to fall in the short term, given that 2013 saw the lowest numbers of both airline incidents and fatalities since 1995.
Aon said that the Malaysia Airlines flight MH370, which disappeared on March 8, carried more passengers (227) than the total global number of airline fatalities in 2013, highlighting the potential for catastrophic loss that the airline sector would always present.
'At this early stage of the year, we believe it is unlikely that this incident will be a catalyst for a shift in current market conditions, however should there be another large loss or a string of losses this could change,' noted the firm.
Aon expects competition to remain healthily for 2014/15 insurance programmes.
Aon's aviation and space practice leader Mike Smith said: 'While it may seem like a contradiction that exposures are rising at the same time as insurance prices are falling, the introduction of the new generation aircraft a couple of years ago means that airlines of all sizes now have access to relatively modern fleet replacement options.
'These aircraft are more expensive but represent a risk reduction because they are safer and prices in the insurance market reflect this. At the same time, the aviation industry continues to improve technology and working practices, again driving down the price of risk.'