Overview of the Aviation Insurance Market
The Q1 2025 edition of Plane Talking by Gallagher provides a comprehensive analysis of the aviation insurance market, focusing on current market conditions, claims activity, and underwriting sentiment across sectors such as airlines, aerospace manufacturers, general aviation, and space.
Q1 2025 followed the anticipated path, characterized by market uncertainty and volatility. Although capacity remains available, pricing is under pressure due to recent significant losses, notably the Jeju Air incident, reportedly reserved at approximately US$300 million. This loss, occurring after the Q4 2024 renewal cycle, has caught insurers’ attention as it impacts current underwriting strategies.
Market Performance and Emerging Challenges
The accumulation of large-scale and attritional losses (under US$10 million) poses a risk of shifting underwriting portfolios into unprofitable territory for the 2024 and 2025 calendar years. This situation has increased scrutiny from senior management and capital providers who closely monitor underwriting returns and cash flow performance.
In 2024, the aviation insurance market experienced significant growth and notable large claims events. The sector’s gross written premiums (GWP) reached a two-decade high, surpassing US$8 billion, driven by increased air traffic and a surge in demand for insurance coverage. Airlines contributed approximately 35% of these premiums, while general aviation accounted for about 47%.
An analysis of over 32,000 industry claims from 2019 to 2024, totaling US$15 billion (€14 billion), revealed that collision or crash incidents and faulty workmanship or defective products accounted for 85% of the total claim value.
Impact of Geopolitical Events and Reinsurance Conditions
The 2022 invasion of Ukraine left around 400 Western-owned aircraft, valued at nearly US$10 billion, stranded in Russia due to sanctions. Legal disputes between aircraft lessors and insurers arose over claims related to these assets. By late 2024, some settlements were reached, while others remained under litigation.
Market insights from Gallagher and Starr Insurance indicate that airline hull and liability lines generated roughly US$1.65 billion in net premium in 2024. Although claims were lower in 2019 and 2020 due to COVID-19’s impact, 2021 saw a return to typical attritional loss levels. Current rating levels fall short of sustainability targets, given increasing claim severity and the effects of social inflation on liability awards.
Despite the availability of capacity, capital providers are evaluating long-term returns before committing further resources. The withdrawal of a major insurer in 2025 might signal further contraction later this year. Ongoing litigation related to Russia-Ukraine aircraft disputes, higher aircraft values, rising repair and parts costs, potential liabilities tied to Boeing 737 MAX issues, and geopolitical risks continue to challenge the airline insurance market.
Sector-Specific Developments and Prospects
Reinsurance conditions also influence market sentiment. Although rates softened slightly in 2024 compared to the previous year, recent losses might affect pricing in upcoming treaty renewals. Direct insurers remain vigilant, especially as reinsurance partners address unresolved claims linked to Russia-Ukraine exposures.
Market activity in aerospace manufacturing and infrastructure risks was light in Q1, typical for this segment. Early trends indicate continuity from Q4 2024, with stable premium offers and strategic underwriting decisions. The first quarter serves as a planning period for underwriters to finalize budgets and forecast premium income. Insurers focus on maintaining or growing shares in favorable risks as 2025 progresses toward busier renewal periods.
The general aviation market continues to experience an oversupply of capacity, keeping the sector competitive. Swiss Re’s exit from the direct aviation market has sparked speculation about further exits. However, the move has not significantly altered available capacity for general aviation clients. The surplus capacity contributes to lower premiums and broader coverage options.
According to the report, insurer capacity for the space sector in 2025 has now been finalized. While most insurers maintained their capital commitments, a few experienced reductions. Volante’s exit from the space market at the end of January was noted, but no other departures were reported.
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