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Aviation Insurance Market in 2025: Legal Battles, Competitive Pressures, Risk Trends

    The aviation industry faced a complex landscape in 2024, shaped by ongoing uncertainty, competitive pressures, and significant incidents, with ‘new normal’ loss conditions persisting for much of the year and marked by a tragic crash in South Korea as well as ongoing uncertainty surrounding the fate of aircraft stranded in Russia, Howden Re has noted in a recent report. Beinsure has highlighted the key insights from the report.

    Despite the absence of major all-risk losses, the year was marked by the Jeju Air disaster in South Korea, the worst civil aviation accident in the country’s history and the deadliest globally since 2018. The crash claimed 179 lives, underscoring the continued risks in the sector.

    Other major events included a collision between two aircraft while taxiing at Haneda Airport in Japan and an Alaskan Airlines Boeing 737 Max 9 losing a door plug and decompressing mid-flight.

    On December 25, a catastrophic crash of an Embraer E190 passenger plane operated by Azerbaijan Airlines occurred near Aktau, Kazakhstan. The aircraft was on a scheduled passenger flight number 8243, traveling from Baku to Grozny.

    Onboard the aircraft were 67 individuals, including 62 passengers and 5 crew members. As a result of the tragedy, 38 people lost their lives, while 29 survived, including three members of the crew.

    10 deadliest airplane crashes account for a total of 5,873 fatalities, profoundly impacting aviation safety protocols and international regulations, according to Beinsure Data.

    Howden Re emphasized that these incidents, under slightly different circumstances, could have been equally catastrophic, reinforcing the importance of vigilance in risk assessment and the ongoing need for reinsurance to protect portfolios.

    Aviation attrition continued to rise throughout the year

    Aviation attrition continued to rise throughout the year

    Aviation attrition continued to rise throughout the year, driven by inflation and increasing costs for new aircraft, spare parts, and labor. These pressures affected even the most profitable direct accounts, highlighting underperformance elsewhere in the industry (see How Global Aviation Re/Insurance Market Has Gone Through a Turbulence?).

    The demand for shares in the best-performing accounts and new business remained high throughout 2024.

    Direct airline lead terms were typically between eight percent and 15% lower on a risk-adjusted basis, as the available capacity was more than double the required amount.

    Following insurers attempted to match lead terms, though some were forced to accept significantly lower terms.

    World’s Biggest Aircraft Crashes of 2024-2025

    YearAccident LocationAircraftAircraft Owner CountryCause of AccidentNumber of Casualties
    2025USABombardier CRJ700 + Black HawkUSAMid-air collision with a military helicopter during landing approach at an airport, exploded mid-air67
    2024South KoreaBoeing 737-800South KoreaCrashed during landing at Muan Airport in southwestern South Korea, overran the runway and crashed into a barrier, then exploded179
    2024KazakhstanEmbraer E190AzerbaijanDamaged by a Russian air defense missile over Grozny, denied landing in Russia, crashed and caught fire at a Kazakhstan airport38
    2024SpainBoeing 737LithuaniaCargo plane crashed during landing approach at Vilnius Airport, fell into the yard of a two-story house1
    2024BrazilPiper PA-42BrazilCrashed shortly after takeoff, crashed into houses in Gramado10
    2024El SalvadorBell UH-1HEl SalvadorCrashed during flight, carrying the head of the National Police of El Salvador9
    2024BrazilATR 72-212ABrazilLost control at an altitude of about 5.2 km, entered a flat spin, and crashed into the ground in Vinhedo, 76 km from São Paulo Airport62
    2024UkraineF-16USACrashed during a test flight1
    2024RussiaMi-8RussiaCrashed in Kamchatka region after losing control due to rotor blade impact with the tail boom, leading to structural failure22
    2024NepalBombardier CRJ-200NepalCrashed at Kathmandu Airport while performing an internal flight transporting airline technical personnel to Pokhara Airport18
    2024RussiaSukhoi Superjet 100RussiaCrashed during a test flight3
    2024TatarstanCessna-172RussiaExcursion aircraft crashed3
    2024MalawiDornier 228MalawiAircraft carrying Vice President Saulos Chilima crashed after takeoff from Lilongwe10
    2024IranBell 212IranHelicopter carrying Iranian President Ebrahim Raisi and other senior officials crashed8
    2024SingaporeBoeing 777-321ERSingaporePassenger aircraft encountered severe turbulence1
    2024RussiaIl-76RussiaEngine caught fire, crashed near Ivanovo16
    2024RussiaA-50URussiaDestroyed mid-air by Ukrainian S-200 air defense over Krasnodar region10
    2024RussiaIl-76RussiaAircraft crashed in Belgorod region16
    2024UkraineA-50 Early Warning AircraftRussiaShot down by Ukrainian air defense, caught fire and fell into the Azov Sea12
    Source: Beinsure.com

    The aviation re/insurance market has gone through a turbulent few years, with the impact of the COVID-19 pandemic, geopolitical shocks and macroeconomic challenges; events that have affected the re/insurance industry as a whole and have caused rates for aviation reinsurance to increase at the most recent renewal, according to Gallagher Re Report Aviation reinsurance challenges.

    The aviation war risk moderation

    The aviation war risk market experienced some moderation in 2024 following substantial price increases after Russia’s invasion of Ukraine.

    Increased competition led to aviation hull war rates declining by up to ten percent, while excess war liability rates remained largely stable due to ongoing capacity constraints and high original limits.

    In the aerospace sector, risk-adjusted rate movements ranged from a ten percent decline to a 15% increase. General aviation, with its broad range of risk types and geographical regions, experienced more variable rating changes.

    Overcapacity in the airline sector continued, which contributed to the ongoing trend of diversification into general aviation, aerospace, and war risk coverage.

    Legal battles involving the world's largest aviation lessors and insurers

    The industry also faced uncertainty due to multi-billion-dollar legal battles involving some of the world’s largest aviation lessors and insurers. These lawsuits stem from aircraft stranded in Russia following the invasion of Ukraine in 2022.

    Initial loss estimates for these cases reached as high as seventeen billion dollars, but confidential settlements and aircraft acquisitions by Russian airlines introduced uncertainty.

    While these developments may reduce the overall payout amount, the losses could still rank as the largest aviation or aviation war loss in history.

    More clarity is expected to emerge in the coming months as initial court rulings are issued. A California state court recently ruled in favor of a group of aviation insurers sued for $128 mn by aircraft lessors who owned three aircraft stranded in Russia due to the war in Ukraine.

    The ruling, made in the San Francisco Superior Court by Judge Ethan P. Schulman, determined that the all-risk and mixed-risk insurance policies involved had exclusions related to war, hijacking, and other perils.

    The defendants in the case included Lloyd’s underwriters and managing agents, as well as underwriters from Swiss Re, Chubb, Berkshire Hathaway, Starr, and Tokio Marine Kiln Syndicates Ltd (see What Lessons Should Be Learn the Insurance Industry After Russia’s Seizure of EU Aircrafts?).

    Despite the uncertainty surrounding these legal cases, risk-adjusted excess of loss rates in the reinsurance treaty market remained stable or saw slight reductions at the first of January 2025, as reinsurers adopted a wait-and-see approach to the Russian leasing cases. Proportional capacity and commission levels stayed largely unchanged for the same reason.

    Aviation industry operates under the “new normal” of loss conditions

    Aviation industry continued to operate under the "new normal" of loss conditions

    The aviation industry continued to operate under the “new normal” of loss conditions in 2024, as there were no major all-risk losses, though there were several significant incidents without loss of life.

    The Jeju Air crash on December 29 was a stark exception, becoming South Korea’s worst civil aviation accident and the deadliest single aviation loss since 2018.

    Insurance coverage for the Jeju Air commercial jet included a policy with coverage of up to one billion dollars per event from Samsung Fire & Marine Insurance Ltd. and four other insurers, with reinsurance led by Axa XL.

    The airline previously confirmed that the policy included liability insurance coverage of up to one billion dollars per accident, for a term running from May first, 2024, to April thirtieth, 2025.

    Despite the large losses aviation has suffered in the last couple of years and months – which have also affected the re/insurance market – the industry is beginning to show green shoots (see Global Reinsurance Market – a Hardest Market).

    Now that the demand for air travel is starting to pick up after the difficult years during the height of the COVID-19 pandemic, it is predicted it will return to almost pre-pandemic levels this year.

    The re/insurance market will always be cyclical, and the aviation segment is no exception to this. In recent years we have seen turbulent cycles that have led to some carriers restricting the amount of aviation business they underwrite, or in some cases withdrawing altogether

    The aviation re/insurance market went through a soft market period which was the result of severe corrections in the early 2000s, following the tragic events of September 11, 2001, and several other large aviation losses; as well as the introduction of exclusions and tightening of terms and conditions.

    Many aviation underwriters also began to introduce pricing tools and use more actuarial resources. Around a decade of low claims activity followed, but during the soft market of the 2010’s there were a series of large losses that occurred at a time when rates were low and terms and conditions broad.

    Aviation industry continued to experience competitive pressure

    Meanwhile, the aviation industry continued to experience competitive pressure, particularly within general aviation. Although underwriters faced challenges in all sectors, they were still able to find profitable opportunities.

    Last year, airline ratings came under pressure due to overcapacity, and the broader trend of diversification into general aviation, aerospace, and war risk is expected to continue in 2025.

    The reinsurance broker reported that risk-adjusted rate movements in the aerospace sector varied, ranging from decreases of ten percent to increases of 15%. The general aviation sector, with its variety of risk types and geographical exposure, saw more inconsistent rating changes.

    Despite the uncertainty in the market, Howden Re observed that risk-adjusted excess of loss rates remained stable or saw slight reductions at the beginning of January 2025 as reinsurers waited for developments in the Russian leasing cases. Proportional capacity and commission levels remained largely unchanged for similar reasons.

    The year also saw continued pressure on aviation attrition, as inflation and rising costs affected new aircraft, spare parts, and labor.

    These cost pressures impacted even the most profitable direct accounts, further exposing underperformance elsewhere in the sector.

    Howden Re reported that shares in the best-performing accounts and new business were highly sought after throughout 2024. Direct airline lead terms were typically 8% to 15% lower on a risk-adjusted basis, as capacity availability exceeded requirements. Following insurers aimed to match lead terms, although some had to accept significantly lower terms.

    Underwriters are actively searching for profitable opportunities while navigating an increasingly competitive and evolving market environment.

    FAQ

    What were the most significant aviation incidents in 2024?

    The most notable incidents included the Jeju Air crash in South Korea, which was the worst civil aviation accident in the country’s history, a taxiing collision at Haneda Airport in Japan, and an Alaskan Airlines Boeing 737 Max 9 losing a door plug and decompressing mid-flight.

    How did the aviation war risk market change in 2024?

    The market saw some moderation following substantial price increases after Russia’s invasion of Ukraine. Aviation hull war rates declined by up to 10% due to increased competition, while excess war liability rates remained stable due to capacity constraints.

    What impact did inflation have on the aviation industry?

    Inflation led to rising costs for new aircraft, spare parts, and labor, increasing aviation attrition rates. Even the most profitable direct accounts were affected, and underperformance became more apparent in weaker areas of the market.

    What is the status of the legal disputes over aircraft stranded in Russia?

    Several multi-billion-dollar legal cases are ongoing, with initial loss estimates reaching up to $17 billion. Some confidential settlements and aircraft purchases by Russian airlines have introduced uncertainty, but these cases could still result in the largest aviation or aviation war loss in history.

    How did the overcapacity issue affect the aviation insurance market?

    Overcapacity continued to put pressure on airline ratings, forcing diversification into general aviation, aerospace, and war risk. Direct airline lead terms dropped by 8% to 15% due to excess available capacity.

    What was the impact of recent court rulings on aviation insurers?

    A California state court ruled in favor of aviation insurers sued for $128 million by aircraft lessors. The ruling determined that war, hijacking, and other perils were excluded from the policies in question. This outcome may influence future rulings on similar cases.

    What is the outlook for the aviation reinsurance market in 2025?

    The market remains uncertain, especially due to pending legal cases, but risk-adjusted excess of loss rates in the reinsurance treaty market remained stable or saw slight reductions. Reinsurers have largely adopted a wait-and-see approach, delaying major reserve adjustments until court rulings are issued.