This year's insurance negotiating process will be “more challenging” than last year, the broker continued, “irrespective of what type of operation is being placed.”

Rate reductions, Aon said, will only be available “in exceptional circumstances.”

“The fact that the economic climate may mean there are a number of organizations renewing with reduced fleets and the fact that 2008 appears to have been relatively safe may provide an interesting dynamic for negotiations in 2009,” Aon said.

Average lead hull and liability premium was around $5.3 million per renewal in 2008, close to 40 percent higher than the $3.9 million in 2007. The cost is below the five-year average, said Aon, but the renewal years 2002 through 2004 were heavily influenced by insurance increases post-9/11.

Some good news, according to the report, was found in the number of fatalities that have averaged 901 between 1995 and 2007 (the figure excludes 9/11). For 2008, the number stood at 384.

All the evidence points to a continued hardening of the insurance market in this sector, Aon said.

December saw a total of 55 renewals, in sharp contrast to five expected in January, and February is expected to be quiet with only one renewal scheduled that month. It will not be until April when the industry gets to see a better picture of the direction of pricing, the broker said.

“The likelihood, however, is that the current hard market conditions will continue for the whole year, given the loss that many airline underwriters will have endured during the last two years,” Aon said.

Separately, in mid-December, Willis Group Holdings said it expected the aviation insurance market to harden further through the end of 2008 into 2009, according to a report from its global aviation practice.

The Airline Insurance Insight report from Willis's global aviation practice reported that lead premiums in November increased 16 percent, while overall program premiums were increasing at an even faster rate.

“As we approach the end of the year, all signs point to a continuing hardening of the market,” Steve Doyle, executive director of Willis Aviation, said in a statement. “The lack of any significant losses recently would appear not to have tempered a change in underwriter attitudes. Insurers undoubtedly feel that they have gained momentum.”

The market saw 18 renewals in November, including some of the world's largest programs. Despite having four more renewals than October, November generated nearly four times the premium due to the size of the programs.

Among the 18 renewals in November were five pure cargo carrier programs. Because of a number of major losses in this sector over the past 12 months premiums spiked up 40 percent, much higher than passenger airlines.

The report noted that insurers were seeking and achieving rate increases in an environment of relatively benign loss levels and overcapacity, which would normally be expected to favor rate reductions.

The principle factors leading to the hardening market, the report said, are insurers controlling the deployment of capacity as part of their strategy to manage the market cycle and capital providers increasing their demands for better returns against the backdrop of the global financial crisis.

The report observed that international insurers are taking a harder attitude toward pricing than those in the U.S. and are attempting to achieve higher percentage increases in premium.

The report noted that the total premium generated in 2008, including known December renewals, was $1.23 billion, an increase of 9 percent, or $101 million, over 2007, despite the fact that growth slowed because some carriers ceased operations in 2008.

For the year, claims activity remained low, the report said. Airline claims currently total $1.29 billion, including a pro rata figure of $390 million with respect to attritional losses. Claims totaled $1.8 billion at this point last year.