"The change in the aviation reinsurance market highlights how the insurance sector has had to react to situations beyond its control==in this case Hurricanes Katrina and Rita," said Doug Peterson, Aon Aviation Global Practice Leader.

Airline damage from Katrina "will be limited, with the majority of aircraft being moved away from the disaster zone prior to the hurricane touching down," Aon noted.

Premium reductions for airlines this year had averaged 7 percent for liability and hull insurance combined, according to Aon. However, the firm said, there is now likely to be a decline in premium reductions, "with certain aviation insurers already claiming that their aviation reinsurance costs have increased.'

Aon, which examined data from 42 airline insurers, said total premiums year-to-date for hull and liability stand at over $530 million==a reduction of 15 percent for hull and 13 percent for liability rates. This compares to nearly $575 million booked from January to September 2004.

With the bulk of renewals taking place in the last quarter, plus increased fleet values and thus higher exposure, premium volumes are expected to edge closer to $2 billion, Aon said.

The firm said the expected reduction of over 15 percent==from $2.4 billion in 2004==is partly the result of consolidation between airlines such as Sterling Airways and Maersk Air, US Airways and America West Airlines, Swiss and Lufthansa, as well as changes such as ABX Air being included in the DHL-led cargo airline pool.

Aon found hull losses from crashes in the first eight months of 2005 totalled $430.5 million, decreasing 14 percent from $503 million through August 2004.

The report said prior to six accidents in August and September, 2005 had been quiet from a loss perspective, and low loss levels seen in 2004 had continued in the first seven months.

In the first eight months, Aon said there were 35 incidents, resulting in 459 passenger and crew deaths, as well as hull losses of $331.2 million and liabilities of $99.3 million.

Aon said this strong safety record meant that there is little evidence that the five major airline crashes in August will have a significant impact on renewal premiums.

The report found that the airline industry has responded positively to a variety of changes and challenges, such as high fuel costs and low-cost competitors.

It also noted that the aviation insurance market had seen the arrival of Aspen Re and Glacier Re. "This increase in capacity and competition emphasizes the market's vitality," according to the report.