U.S.-Iran hostilities have become a central issue in airline insurance negotiations, with WTW warning that the conflict is changing how underwriters price aviation risk across the Middle East.
In its Airline Insurance Market Renewal Outlook for Q2 2026, the broker identified three main pressure points: operational disruption, tighter insurance capacity, and longer-term stress for the aviation sector.
Airlines operating within, into, and out of the region grounded aircraft and rewrote schedules after fighting began. Kennedys described the disruption as severe, with airport closures affecting several major regional hubs.
Insurers, brokers, and airline clients worked closely to share intelligence, assess exposure, and keep coverage in force, including for repatriation flights.
Despite military activity near commercial airports, no major civilian aviation claims have emerged. A ceasefire has cooled tensions and reduced some surcharges applied to regional operators.
Even so, carriers still face weaker passenger demand and higher jet fuel costs as supply chains remain unstable.
The response extended into the London market. Lloyd’s activated its major event response group to test syndicate exposure across aviation, marine, energy, and political violence.
The review used its Realistic Disaster Scenarios framework, though Lloyd’s said it remains too early to draw firm conclusions while conditions continue shifting.
John Rooley, Willis’s chief executive of global aviation and space, said insurers did not issue cancellation notices because aircraft in the region already fell within the existing grip of peril. That position helped keep coverage active, though at higher cost for some operators.
The Russia-Ukraine war continues to influence underwriting behaviour.
WTW said a 2025 London High Court ruling on the same doctrine has shaped market decisions, with insurers favouring additional premiums over geographic exclusions to maintain cover.
Those lessons still weigh heavily. Russia-Ukraine pushed hull war rates up by as much as 100% after Western sanctions stranded hundreds of aircraft in Russia, creating an estimated $12 bn exposure.
Kennedys noted that the Butcher judgment covered only a small number of lessors and a limited portion of the trapped fleet, leaving unresolved claims and legal uncertainty.
Hull war remains the line under greatest scrutiny. Rates had fallen to historic lows before Russia-Ukraine reset the market.
Capacity remains available, though renewed geopolitical tension is expected to harden negotiations through 2026.
Hull and liability coverage faces similar pressure. Capacity still exists, but thin 2024 underwriting margins and large 2025 losses have changed insurer sentiment.
WTW said insurers are considering increases from around 10% for clean risks, with sharper rises for distressed accounts.
The Iran conflict strengthens that pricing trend. Kennedys reports increases above 10% for lower-risk carriers, with much steeper pricing for airline buyers operating Middle East routes.
WTW also said North American claims from 2025 remain under development, with reserves possibly requiring reassessment. The broker described insurer behaviour as measured, with carriers seeking sustainable pricing without inviting new capacity into the market.
