Aon has revealed the cost of repairing the Qantas A380 which had an engine failure near Singapore last month will be about $US70 million ($71.7 million).

The aircraft suffered damage to the wing and there has been talk about Qantas having to replace the entire unit. The Rolls-Royce engine has been written off.

Qantas is now threatening to sue Rolls-Royce for compensation after it had to ground its fleet of six A380s for three weeks and replace a number of engines after air safety bureau alerts.

According to Aon in its latest Airline Insurance Market News, this year is shaping up to be one of the most expensive years in aviation insurance history.

To the end of November, total losses are standing at $US1.96 billion ($2 billion) compared to $US2.08 billion ($2.13 billion) for the whole of 2009.

As hull losses increase, Aon reports only eight of the 22 airline renewals this year have seen both hull and liability premiums increase.

“While the headline lead hull and liability premium numbers suggest the market is still hard, the airline insurance market appears to be in the process of softening,” the report said.

“The 19% average premium increase in November is influenced by three airlines that have either had losses, come from group insurance programs or both.

Aon says based on current trends, lead hull and liability premiums for the year should total about $US2 billion ($2.1 billion), with losses at $1.96 billion subject to there being no further major claims.

“Taking into account fixed and reinsurance costs, the airline insurance market has not achieved a return in four years,” the report said.

“If the market is softening through the renewal season, the $US2 billion forecast may turn out to be somewhat optimistic.”

Renewals have also been hit by seven airlines closing down which has led to a $US20 million ($20.5 million) drop in lead hull and liability premiums.

A further $US15 million ($15.3 million) of premiums have left the market as airlines join group schemes, Aon says.

But this has been countered with $US35 million ($35.8 million) of new premiums from airlines growing or new businesses.