The airline insurance market could be set to make its first loss since 2000, according to Aon Corporation.

Research by the Aviation & Aerospace division of Aon reveals that, with more than 85 percent of the industry'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 this year, but the level of losses will mean that claims will be at least $1.53 billion.

Despite aviation being a catastrophe market, the high level of claims is the result of a consistent level of losses throughout 2007, rather than a single major loss.

This follows a number of years with a low frequency of claims globally, a factor which has attracted a great deal of insurance capacity to the airline markets as global underwriters have aimed 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 sector during next year and predicts that there is unlikely to be a rapid reduction in underwriting capacity due to one bad year, but it may become a tougher market in 2009 if the trend continues into a second year.

"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 10 years ago, so we do not expect capacity to plummet overnight."