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    Willis: Airline Insurance Market Shows Continued Signs of Hardening

    Double-Digit Increases Seen in November; Trend Expected to Continue

    London, UK, December 16, 2008 –- Willis Group Holdings (NYSE:WSH), the global insurance broker, expects aviation insurance prices to rise and the insurance market to harden further through the end of 2008 and into 2009, according to the latest report issued by the broker’s global Aviation Practice.

    The latest Airline Insurance Insight report from Willis indicates that lead premiums in November have increased 16 percent, while overall program premiums are increasing at an even faster rate. The market saw 18 renewals in November, including some of the world’s largest programs. Despite only having four more renewals than October, due to the size of the programs, November generated nearly four times the premium than the previous month. November is now the third busiest month for the number of renewals – after December and July – but ranks second only to December in terms of premium volume.

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

    The report notes insurers are seeking and achieving rate increases in an environment of relatively benign loss levels and over capacity, which would normally be expected to favour 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.

    “As we approach the end of the year, all signs point to a continuing hardening of the market,” said Steve Doyle, Executive Director of Willis Aviation. “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 report noted that the total premium generated in 2008 to date, including known December renewals, has been US$1,233 million, an increase of 9 percent, or US$101 million, over 2007, despite the fact that growth has been slowed by the absence of carriers that have ceased operations in 2008. In a previous report, Willis said continuing firming of rates could mean that gross premium for 2008 will exceed US$2 billion, driven by major renewal activity in December. By comparison, gross premium for 2007 was US$1.83 billion.

    December is the busiest month of the year for renewals, both in terms of the number of renewals and premium volume. Last year, December renewals generated about 50 percent of the year’s premium, and that percentage is expected to increase in 2008, amplifying the effect of the hardening market and setting the benchmark for renewals in 2009.

    The 55 risks scheduled to renew in December include many of the world’s larger carriers. At this time, known December renewals total US$350 million in premium, up 8 percent over last year, while Average Fleet Value (AFV) is up 7 percent and passenger numbers are up 4 percent. However, this information does not include many of the renewals of major North American carriers, the majority of whom renew in the second half of the month and last year accounted for 43 percent of December’s premium. As more information becomes available, exposure percentage change figures (AFV and passenger counts) are expected to be reduced, reflecting the impact of the economic downturn.

    For the year, claims activity remains low, the report said. Airline claims for 2008 currently total US$1,289 million, including a pro rata figure of US$390 million with respect to attritional losses. At the same point in 2007, claims totalled US$1,797 million.

    Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.


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