‘Dark Clouds’ Hang Over Aviation Insurance Market, Report Says
New review predicts that the airline insurance market will likely remain competitive in the first half of 2025.
According to Willis Towers Watson’s recently published Airline Insurance Market Review for the first quarter of 2025, momentum from the fourth quarter of 2024 ‘shows little signs of abating.[Credit: Shutterstock]
Global insurance company Willis Towers Watson (WTW) has predicted that the airline insurance market will likely remain competitive in the first half of 2025 and suggested direct insurers may be more receptive to negotiation.
According to WTW’s recently published Airline Insurance Market Review for the first quarter of 2025, momentum from the fourth quarter of 2024 “shows little signs of abating.”
"Despite much-discussed dark clouds on the horizon, insurance supply has remained in surplus," the report said. "Those clouds have started to change shape, however, and they are now looming large over the aviation insurance and reinsurance markets."
The possible resolution of ongoing aircraft leasing claims caused by the Russian invasion of Ukraine could also “rapidly reduce reinsurer or insurer appetite” and alter market conditions, it added.
“In a market that is susceptible to change, it is prudent not to lose sight of the longer-term view,” the report stated. “Buyers should engage proactively ahead of renewal and seek advice from their broker about the mitigation strategies that could come into play if market conditions become more constrained.”
The report stated that current court cases for leased aircraft seized due to the war “could be resolved in a way that puts some of the claims on the reinsurance market.”
“In that scenario, capacity could retreat, reducing the supply into the direct aviation market and ultimately leaving less choice for buyers,” the report stated. “This means that there is strong potential for a sharp change in market direction as 2025 progresses.”
Because these aircraft were seized around three years ago, both direct and reinsurance organizations have had time to review their portfolios and prepare for various claims scenarios.
“The bottom line is that at this stage it’s hard to say what will happen until the court cases reach their conclusion,” the report stated.
Other key findings in the report included:
- Insurers’ concerns that rising costs of smaller or attritional claims due to inflation are “ eating away at margin and leaving little left to cover major loss events.”
- Attritional claims are estimated to represent between half and two-thirds of the total annual global premium.
- Despite the liability claims that will follow the tragic losses in Azerbaijan and South Korea, these events are “unlikely to significantly affect the direct airline insurance market.” Instead, composite airframe repair costs, expensive engines, and the effect of inflation in liability claims will be key as the year develops.
- With excess capacity meaning rate deterioration throughout 2024, it appears likely that rate reductions will continue to be offered in early 2025—unless there is a “squeeze in the supply chain of insurance capacity.”
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