LONDON-Aviation insurance buyers should brace for further rate hikes, according a leading figure in the London aviation market.

There was a "long-overdue correction" in the aviation market's last round of renewals, after four years in which claims have outstripped premiums, according to Graham Nichols, chairman of the Aviation Insurance Offices' Assn. He added that further rate increases will follow.

"The market has realized that it has to charge realistic prices...and that is happening now," Mr. Nichols said at a Wednesday press conference following the association's annual meeting. The AIOA represents the company aviation insurance market in London, which underwrites approximately 60% of business placed in London, with the other 40% going to Lloyd's of London.

The AIOA reported that in 2000, aviation claims paid by its members totaled L490 million ($731.6 million), against premiums received of only L408 million ($609.2 million). Last year was the fourth straight in which claims exceeded premiums.

Mr. Nichols, who is also chief executive officer of Westminster Aviation Insurance Group, said that although underwriters realize rates need to harden, it will take "at least 24 months to get trading to a proper level."

Although Mr. Nichols said rates began hardening in the last renewal period, he declined to comment specifically on the level of increases achieved. Instead, he noted that worldwide aviation premiums total around $2 billion annually, whereas to achieve profitability, they should be in the range of $3 billion to $4 billion.

Mr. Nichols said deductibles on aviation policies are also "clearly overdue for a revision," noting that the value of aircraft has risen dramatically since deductibles were last changed in 1984.

Westminster Aviation has discussed with clients the need for changes in the deductible level, explaining that if policyholders want coverage for aircraft maintenance, "we must load the cost," Mr. Nichols said.

"Other markets, I suspect, are doing the same," he said.

Citing figures from London-based Airclaims Ltd., which compiles aviation safety statistics, AIOA said 23 Western-built jet aircraft were lost last year-the same as in 1999-and that the estimated cost of major hull losses, including partial losses, was $848 million, down from $997 million in 1999. Passenger fatalities, however, surged to 726 in 2000 from 299 in 1999.

Mr. Nichols said this represented "an average bad year." He added, however, that "if these figures are translated into estimated costs, including potential liability costs, the total far exceeds the premium generated-and that was only for an average loss-cost year."

Commenting on the space market, he said the trend has been similar to that in the aviation market, in that rates are too low, claims are exceeding premiums and many insurers are locked into long-term programs.

"A lot more realism has crept into the (space) market during 2000," and insurers are raising rates in the face of a tougher reinsurance environment and some withdrawal of capacity, Mr. Nicholson said.