Despite uncertainty around losses and other ongoing challenges, capacity levels are healthy, and the pursuit of premiums is generating increased insurer competition. Capacity levels have increased during the past 12 months, with several new entrants entering the class further boosting levels and available options. Additionally, many existing markets are showing increased appetite and a willingness to deploy extra capacity and write multiple lines (e.g., All Risks and Hull War), perhaps with one eye on the potential hardening of rates that the Russia/Ukraine losses could cause when resolved/settled. These factors are contributing to the softening market conditions we are now experiencing.

Looking at the data, the airline insurance market has produced strong underwriting profits for the past four consecutive years. But as our Lead Lines contributor highlights, this profitability has been achieved under exceptional circumstances, primarily due to a culmination of:

1) Reduced aircraft activity during the pandemic

2) A lower frequency of claims

3) A period of higher rates

4) Growth in underlying exposures

However, profitability has attracted capacity and in turn competition and rate softening, shifting the insurance cycle back in favour of buyers.

Despite this, the longevity of this buyers’ market is in question, with rising reinsurance costs, claims and inflation (amongst other factors) squeezing insurer profit margins. The year-end insurer results and 1 January reinsurance renewals could be crucial to what transpires in terms of future capacity levels and overall underwriting direction.

In terms of airline losses, 2023 was the safest year for flying by several parameters, according to the International Air Transport Association (IATA). In contrast, 2024 has experienced a notable uptick in loss activity. During the first half of 2024, the airline market suffered some significant and costly claims, and the third quarter continued this trend, recording two fatal losses and several other noteworthy incidents including but not limited to:

• 24 July 2024 – A Saurya Airlines Canadair CRJ-200ER crashed on take-off in Nepal, killing 19 occupants. The aircraft was being flown to Pokhara for maintenance and among the passengers were maintenance engineers, airline staff and one child.
• 5 August 2024 – Calgary International Airport was hit by torrential rain and intense hail, resulting in significant damage to the airport buildings and multiple aircraft. At least 19 aircraft are reported to have sustained damage, with 17 of these belonging to WestJet (circa 10% of the airline’s fleet). This event is one of several extreme weather events to have produced aviation claims in 2024 but it is unclear what the combined total repair bill for this latest incident will be.
• 8 August 2024 – A Voepass ATR 72-500 was destroyed when it crashed near Vinhedo, São Paulo. All 58 passengers and 4 crew fatalities were killed. A preliminary report has indicated the aircraft lost lift and went into a "flat spin" after the pilots faced difficulties with icing buildup and de-icing attempts.
• 9 September 2024 – A Trigana ATR 42-500 sustained significant damage from a runway excursion during take-off in Papua. Fortunately, all passengers and crew evacuated safely.
• 10 September 2024 – A Delta Air Lines Airbus A350-941 and Endeavor Air Bombardier CRJ-900LR were involved in a ground collision at Atlanta International Airport, GA, with both aircraft sustaining damage.

The aviation sector produces some of the highest-value and high-profile claims in the insurance sector, due to large aircraft values, high repair costs, and high liability awards. Increasing loss activity post-pandemic and rising claims costs remain a serious concern for insurers and with year-to-date airline losses up over the prior year, and three months of 2024 still to play out, insurers will be anxiously hoping for no further major losses before year-end.