Capacity remains healthy, but under greater scrutiny
As we observed in the Q4 Aerospace Insurance Market Update the aerospace insurance market was relatively benign during 2024. According to WTW internal market analysis, the sector overall appears to have been broadly unchanged from a premium point of view, while exposures rose on average by around 15% as the aviation industry returned to pre-COVID-19 levels of activity.
The exposure growth with minimal increase in insurance costs was driven by healthy capacity in the aerospace insurance market. The flat conditions meant enhancements to insurance programs, such as long-term agreements (LTAs) that offer certainty of insurance cost beyond a one-year policy, were available by negotiation for aerospace operations that matched insurers’ defined risk profiles and engaged proactively with their insurance partners.
According to the International Air Transport Association (IATA), passenger growth continued in January 2025, up by 10%[1], which would suggest that the exposure growth will continue for programs placed during the early part of the year. This continues the recent trajectory of passenger numbers, which IATA suggests enjoyed a better than 10% growth for the whole of 2024.[2]
Another area that is likely to see continued high demand is airframe manufacturing and its supporting supply chains, where orders and waiting lists are exceptionally high.[3] The Centre for Aviation (CAPA) has estimated that it will be three or four years before the global aircraft order book returns to normal.[4] This situation seems likely to be driving the relatively high exposure growth forecasts at both airframe manufacturers and maintenance, repair and overhaul operations.
Pandemic-related employment changes were widely thought to have led to a loss of experience in several parts of the aerospace sector. The spotlight was particularly on ground handlers and refuellers in the immediate aftermath of the COVID-19 lockdowns and underwriters moved to ensure that the price of insurance reflected the perceived level of risk. This process appears to have relaxed, with the two sub-sectors mostly enjoying relatively positive treatment from insurers in 2024, according to WTW estimates.
While capacity in the aerospace insurance market appears to be abundant, insurers constantly review their commitments to all lines of business to ensure that they meet their targets within defined risk tolerances and their obligations to their overall business plans.
We have already seen one major aviation insurer announce its departure from primary aviation lines of business during 2025. It will continue to support the industry from a reinsurance perspective and WTW’s aerospace team can report that other insurers have increased their capacity, which should mitigate any shortfall.
Despite capacity continuing to be relatively healthy, aerospace underwriters are thought to be under increased scrutiny from their senior management teams. It is understood that underwriting teams are now having to justify their decisions internally to those outside of the immediate aviation team. There is also suggested to be increased supervision of aviation decision making.
As we discussed in the Airline Insurance Market Renewal Outlook for Q1 2025 , the airline losses that occurred at the end of 2024 and early 2025 are likely to drive conversations over the next few months.
According to some analysis, the claims involved are likely to be close to exceeding total annual hull and liability premium for the airline sector for the whole of 2025.[5] Incident investigations are still ongoing, so it is impossible to say whether any of the claims will fall on aerospace insurers, but it is important to point out that while the claims and their associated costs will be significant, they come after a period with relatively few incidents.
There is also no common cause that links the incidents and so this recent run of losses appears to be a tragic set of coincidences rather than an indication of an identifiable issue which could affect flight safety and increase the likelihood of similar claims.
The aviation insurance market is both mature and highly segmented into different areas: aerospace, airline, hull war and general aviation. Claims in one area do not always directly influence claims in another area. The reasons for the losses will be examined in minute detail and while contagion between markets is possible, at this stage it is likely to be limited. The conclusion of certain long-tail claims stretching back to the end of the last decade could have more of an influence as the year progresses, however.
What this means for aerospace organizations looking to place their insurance programs over the next few months is that negotiations are likely to be more robust in 2025 than they were in 2024. Add-ons such as LTAs could become more challenging and with some insurers targeting increases in the second year, if offered.
There are four other factors that are likely to influence market direction as 2025 progresses.
Liability award models have changed[6] and the recent incidents in North America are likely to focus discussions around claims inflation. The aviation industry continues to be safe, but it operates in an environment that has the potential for catastrophic incidents and alongside the liability award model increase, the value of aircraft is rising, as is the cost of repairs and parts.
Secondly, the ongoing court cases surrounding the re-registration of aircraft leased by Russian airlines following the start of the Ukraine crisis could potentially reach a conclusion during the next few months.[7] At this point, there is still a great deal of uncertainty surrounding where the responsibility for these insurance claims will ultimately lie, and some of the cases are still being settled out of court.
Related to this, geopolitical uncertainty continues to be a factor in all economic decision making, and this can have a double influence on the aviation sector, both in terms of travel and investment decisions made by companies and individuals and their knock-on effect on airports, airlines and their associated supply chains. Compounding this, the uncertainty also led to shifts in AVN52 premiums, as a result of the risk of war and associated losses and a higher number of territories perceived to present an increased level of risk.
It’s worth noting that after two years of upwards reappraisal in the AVN52 market, rate increases appear to have leveled off over the last few months. The main reason for this is that the upward trend seen in 2023 and 2024 attracted more capacity to the market and the resulting competition for inclusion has flattened market expectations.
Finally, the claims associated with the wildfires in Los Angeles are likely to be significant, with some estimates putting the damage at US$250 billion with the insurance loss in the region of US$30bn,[8] much of which will come from the reinsurance sector. The reason that this might be relevant to the aerospace insurance market is that aerospace underwriters compete with other lines of business for capital from their insurance companies and have to show adequate returns to prove shareholder value. When a sector such as property insurance suffers a major event such as the wildfires, there is likely to be a rebound in rating, which could create competition between lines of business as they vie for the use of company capital.
Reinsurance is placed throughout the year, which means we should soon get an indication if there is any changes to market direction. It seems likely that reinsurance discussions will start early as the market strives to understand expectations.
Given these factors, we recommend that aerospace companies engage actively with their insurance and risk management partners during 2025 because discussions are likely to be considerably more robust than they were in 2024. Insurers are likely to be willing to negotiate, but they need to understand the full risk profile of the companies that they are being asked to support.
Aerospace organizations often have comprehensive operations data that can be converted into information to support risk management decisions. If discussions are well-managed and start early, this puts aerospace organizations in a position to continue to work positively with the insurance and risk management sector, even if there is more scrutiny than there was in 2024.
