What’s new: In brief (March 22, 2005)

2004 saw the lowest level of losses in the history of the global aviation industry, according to a new report by Aon’s U.K. division. While the 1990s saw an average 22 loss incidents per year, there were just 15 in 2004. However, total losses rose moderately in severity to US$1 billion. On average, premiums dropped 7% in 2004 for the world’s airlines, with a stable outlook for 2005 renewals. 2005 will also mark the first insurance policy placed for the Airbus A380, which the report says “will represent peak exposures in both hull value and seating capacity in a single aircraft”.

U.S. media are reporting two AIG executives were fired this week for refusing to give information in New York Attorney General Eliot Spitzer’s probe into finite reinsurance. Sources say former CFO Howard Smith and former vice president, reinsurance Christian Milton were both dismissed. The company had announced Smith was “on leave” last week concurrent with the announcement of CEO and chair Maurice “Hank” Greenberg’s retirement.

Swiss Re US senior economist David Laster says despite the decision Tuesday by the Federal Reserve to increase the target fed funds rate by 25 basis points, the current rate of 2.75% is still “quite low” according to most inflation measures. This means the Fed is likely to continue to raise the rate by 25 basis points at each of its next five meetings, predicts Laster. The only factor which may impede this would be rising energy prices. Laster adds that other central banks, including Canada, will likely remain “on hold”. In Canada, slowing economic growth should keep the Bank of Canada from raising rates until the third quarter, Laster predicts.