08 January 2026
Airline Insurance Q&A
The aviation insurance market faced significant challenges through 2025, driven by substantial losses, escalating claims costs, and shifting market and geopolitical dynamics. In this complex and ever-changing landscape, Nigel Weyman, Global Executive at Gallagher Specialty, reflects on 2025, explores the latest market conditions and challenges, and provides insight into future trends and outlook.
Q) As 2025 concludes, what were the key renewal themes? How did market conditions develop, and how did this affect negotiations?
The 2025 renewals marked a significant turning point in the trajectory of the “All Risks” rating cycle, with upward pricing adjustments sought across all accounts. This represented a stark contrast to the trend observed in 2024, where rate reductions were largely commonplace.
This market shift was driven by a costly accumulation of major losses incurred at the end of 2024 and through early 2025, which placed the class under intense scrutiny. Several of these catastrophic losses resulted in substantial claims, the magnitude of which had not been seen in years. By mid-2025, market loss estimates had already surpassed annual net premium levels, positioning 2025 as another consecutive loss-making year for the airline insurance market. The situation was then further exacerbated by the UPS Airlines total loss on 4 November, which reinforced underwriting resolve across the market.
The realisation of another loss-making year either encouraged greater underwriting discipline or led to management directives aimed at achieving a better balance within the Airline “All Risks” portfolio. Renewal outcomes varied significantly, depending on the individual airline's risk profile, exposures, and loss history. Airlines with poor loss ratios faced high double-digit rate increases. Wide-bodied operators purchasing liability cover in excess of USD2 billion encountered low double-digit rate increases, while narrow-bodied fleets with relatively low liability limits experienced more modest adjustments.
US-based airlines, or those with significant exposure in the US, faced the greatest scrutiny following several major losses in the country through 2025. As the year progressed, the capacity for such risks became increasingly restricted or scaled back, creating challenges for renewal. Insurers demonstrated a growing reluctance to overexpose their capital to the substantial Probable Maximum Loss (PML) posed by US liability awards.
Despite these challenges, brokers were able to engage in constructive negotiations, albeit through some difficult discussions. Clients who had the foresight to incorporate long-term structures within their programmes fared better than those relying solely on open-market arrangements, underscoring the value of such strategies.
Encouragingly, while rates increased, the availability of high levels of capacity helped temper some insurers’ efforts to drive the market towards harder conditions. As a result, the actual technical rate increases were relatively manageable for most buyers. For insurers, this upward shift in pricing was a step in the right direction, though many underwriters indicated that it fell short of achieving the necessary balance.
Looking ahead, individual underwriting results for 2025 will undoubtedly influence future capacity deployment and market sentiment. Consequently, further rate increases are anticipated through 2026.
Q) The long-disputed Russia leasing claims have now reached some resolution, with the UK High Court ruling in favour of the lessors against Hull War insurers. Meanwhile, global conflict, geopolitical volatility and heightened tensions are at an all-time high. Against this backdrop, War pricing softened through 2025. What are your views on this market, and what might we expect to see in 2026?
Amidst the backdrop of a hardening “All Risks” market, the Hull War market experienced further softening compared to 2024. At first glance, this appeared counterintuitive, particularly given the UK High Court's ruling that the Russia leasing claims constituted a Hull War loss. Market reports estimated the loss at USD 6.5 billion or more, making it the largest loss in aviation insurance history. Yet, double-digit rate reductions became commonplace.
The reasoning behind this apparent contradiction lies in the dynamics of supply and demand. The Hull War market is now abundant with capacity, as new entrants were drawn in by the unprecedented premium levels that arose in anticipation of the court ruling. Many in the market view the claim as a ‘black swan’ event, largely due to the unique circumstance that the aircraft in question were not registered in Russia, meaning insurers were not protected by the Government of Registration sub-limits. Furthermore, the loss has now been crystallised, and it is expected to be shared between direct insurers and reinsurers. The cumulative premium collected over the intervening years has also significantly mitigated the financial impact.
Despite the substantial rate reductions, most Hull War insurers acknowledge that the current premium levels remain robust and sufficient to address ‘normal’ Hull War events. The competition for market share has driven the supply-and-demand dynamic, enabling brokers to leverage this competition to their clients' advantage.
Looking ahead, absent another market-changing event, we do not anticipate significant shifts in this dynamic. Capacity remains stable, and competition within the Hull War market is expected to persist.
"Any period of rising rates is naturally a concern for buyers. However, it is widely recognised that claims costs have increased significantly, both in terms of physical damage and the sharp escalation in liability settlements."
Q) The airline market suffered a costly accumulation of major losses at the end of 2024 and through 2025, and many underwriters have been vocal in stating that the airline insurance market is underperforming, with premium volume not keeping pace with the level of claims growth. Do you see this as a cause for concern?
Any period of rising rates is naturally a concern for buyers. However, it is widely recognised that claims costs have increased significantly, both in terms of physical damage and the sharp escalation in liability settlements. While major tragedies are thankfully rare, thanks to advancements in safety by manufacturers and operators, they do still occur. Insurers have had to recalibrate their loss expectations to reflect the latest liability awards.
Perhaps even more challenging than major tragedies are the costs associated with attritional losses. The composite structures of new-generation aircraft and the high cost of advanced jet engines have driven these losses to unprecedented levels (as highlighted by our claims specialist, Andy Pickford, later in this edition). Some insurers argue that the cumulative impact of attritional losses now almost entirely erodes the total airline premium base at its current level, leaving little to no margin to cover major losses. Furthermore, these claims, while substantial, often fall below reinsurance thresholds, meaning they are fully retained by direct insurers without the benefit of reinsurance recovery.
These loss costs are unlikely to decrease, which has been a significant factor in the strengthened resolve within the “All Risks” market. Encouragingly, the market has responded by implementing technical rate increases in relatively modest increments. This approach offers two key advantages: firstly, it allows most buyers to better manage the increases, particularly when offset by premium savings in the Hull War market; and secondly, a measured approach to rate adjustments mitigates the risk of a sharp market correction and an inevitable collapse in subsequent years. Historical evidence shows that such collapses lead to market disruption and fail to create a sustainable, long-term marketplace.
Q) Insurers rely on data analytics, and there is a growing focus on utilising new AI-driven underwriting and predictive modelling to offer more accurate risk assessments and pricing calculations. What are your views on this? Do you believe such advancements will lead to a fundamental shift in underwriting and are positive for insurance buyers?
The increasing use and reliance on artificial intelligence (AI) within the insurance industry is poised to significantly influence how we approach and understand the business. For many years, both insurers and brokers have sought to leverage the vast amounts of data generated by the aviation industry to provide more insightful rating justifications and to better distinguish between operators. AI will accelerate this ambition by enabling the analysis of extensive historical and real-time data, resulting in rating models that are far more sophisticated than those currently in use.
As this technology continues to advance, we can expect a ‘battle of data’ to emerge as a central aspect of the negotiation process. However, while AI delivers substantial benefits, it remains crucial to balance these technological advancements with human skill. Underwriting will continue to be governed by the traditional dynamics of supply and demand, which will remain a fundamental factor in shaping the market.
Q) Lastly, to summarise, what can aviation insurance buyers expect in 2026? How do you see the market trending, and do you have any advice to offer?
Aviation insurance renewal activity is typically limited during the early months of the year; however, at this stage, the outlook for 2026 appears likely to follow a similar trajectory to 2025. We anticipate another incremental increase in “All Risks” technical rates, comparable in scale to those seen in 2025. Prudent buyers would be well-advised to budget accordingly for this scenario.
Hull War rates are expected to continue softening, which could once again provide a valuable offset against the rising premiums on “All Risks” policies. Outcomes will vary significantly depending on geographical regions and liability regimes, with USA exposures likely to play a prominent role in negotiations.
Given the delicate balance of current market conditions, it is essential to remain cautious and vigilant. An early major loss or a significant market or global event could act as a catalyst for a sudden and dramatic shift in the market landscape.
Not all brokers are equal, and Gallagher’s extensive knowledge, global team, and tailored approach uniquely position us to support clients in navigating these challenges. Our proven ability to deliver strategic solutions and leverage market relationships ensures the optimum outcomes for our clients, and we are well-equipped to handle whatever transpires.
In Summary
- Incremental Rate Increases in “All Risks”: these technical rates are expected to rise further in 2026, similar to the modest increases seen in 2025. Buyers should budget accordingly for these adjustments.
- Continued Softening in Hull War Rates: Hull War rates are likely to decline further, driven by abundant market capacity and competition. This could help offset rising “All Risks” premiums.
- Geographical and Liability Variations: Outcomes will vary significantly based on geographical regions and liability regimes, with US exposures under greater scrutiny.
- Impact of Attritional Losses: The rising cost of attritional losses, driven by advanced aircraft structures and new generation jet engines, continues to erode the premium base, leaving limited margins for major losses.
- Market Sensitivity to Major Events: The market remains delicately balanced, and an early major loss or significant global event could trigger a sudden and dramatic shift in market conditions. Caution and vigilance are essential.
- Client Differentiation and Broker Strategy: The ability to utilise data and differentiate clients based on risk profile, combined with effective broker strategies, will remain critical in determining the outcomes achieved during renewals.
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