State of the Insurance Market Report:
2025 Outlook

Aviation

With added capacity and booming appetites, most aviation insurers are offering flat rates to retain business, and lowering rates to attract business, meaning we could be nearing the end of a hard market. But reinsurance costs continue to soar from several challenges including inflation, repair and parts costs, fluctuating fuel prices, supply and demand, and unforeseen circumstances.

Market Conditions

 

While rates continue to stabilize, aviation underwriting is more competitive than ever in general aviation (GA), a term covering a wide range of operations. Experienced underwriters move around the industry, changing carriers, and bringing new ways of doing business. These changes force new strategies and ways for insurers to model their competitive edge, further enhancing the long-term health of the aviation insurance industry. With more competition, there is more capacity and lucrative opportunities for current customers and newcomers in the aerospace industry.

As the year progresses, we’re likely to see more reports surrounding new technologies with tools dedicated to the aerospace workplace and underwriting toolbox. As aviation technology and practices evolve, regulatory framework will need to adapt, and compliance requirements could impact coverage options.

Artificial intelligence (AI) driven systems to manage the increasingly complex air traffic will emerge. Satellite technology may provide more accurate and comprehensive tracking of aircraft to improve safety and efficiency, but navigation, airspace, and other surveillance systems may be upgraded to control aircraft on the ground and in the air. Airports will incorporate smart technology to streamline operations, from automated check-ins and baggage handling to efficient passenger flow management.

Advancements in battery technology and alternative fuels, like sustainable aviation fuel (SAF) will make electric and hybrid aircraft more common – with the goal of reducing carbon emissions. Hydrogen fuel cells could become a primary source of power for commercial aircraft offering zero emissions alternative to traditional jet fuels. Aircraft manufacturers and innovators around the world are racing to design the next generation of aircraft supporting reduced emissions.

Autonomous drones may be able to execute complex filming sequences or fire mitigation without human intervention. Enhanced safety features improve collision avoidance and more durable batteries, and other advanced features could mitigate risk factors and add new drone operators to the spectrum.

However, new innovations present challenges with current compliance​.

  • Given the enormous capital demands and long-term investments needed to produce ground infrastructure we’re a long way from newer technologies. Manufacturers have made progress in the aircraft themselves, but there’s no ground infrastructure or regulations in place to support the energy and sourced fuels for operation.
  • Safety is the top priority for GA and commercial airlines. Aviation insurance is heavily impacted by catastrophe (CAT) loss versus attritional loss, so stability and capacity are fragile when viewed realistically. Safety trends will remain ongoing to include investment in aircraft model specific training, aviation department training for ground crew and maintenance staff, as well as overall safety initiatives to enforce workplace safety.
  • Aviation attrition continues to rise, driven by rising cost of aircraft components, global inflation, supply and demand, and retainment of talented and skilled repair crews. The industry also faces uncertainty due to multi-billion-dollar legal battles involving aircraft lessors, manufacturers, maintenance repair facilities, and third parties. Despite large losses suffered in the aviation industry over the past few years, the GA market remains profitable.

While it’s difficult to know how fast the market will develop, underwriting and claims will need new technologies to analyze risks and liabilities prioritizing access to safety and data to correlate premiums. With new and advanced air mobility technology — drones delivering cargo and other operations in research and development test phases — underwriters are already supporting these risks. Like trends in other sectors, aviation insurance may move toward usage-based models, where underwriters base premiums on actual operation data rather than traditional metrics.

The aviation insurance industry is resilient yet cyclical, adapting to new exposures, technologies, and unforeseen events as they occur. The industry has long been at the forefront of advanced technology — from research and development to operational flight and management — and is poised to maintain stability in the new year.

Coverage Considerations

 

Several factors influence insurance buyers in the aviation sector, including:

  • New capacity: There is a new aviation insurance presence, promoting new appetite, market share, and market capacity. Existing markets are also increasing market share and appetite, or at least working to preserve it, which leads to a more favorable insurance buying environment for clients.
  • High premiums for new aircraft: While rates remain mostly stable in comparison to previous years, new aircraft deliveries result in premium increases. The values associated with the new aircraft (average $80M USD) are highly attractive to insurers and buyers.
  • Pilot training: Choosing a flight school approved by the underwriters and accruing additional flight experience may help you achieve better rates. When in doubt, come prepared to discuss your plans to build experience and consult with an aviation insurance broker. They can provide invaluable insights and recommendations based on your circumstances and needs.

Aviation Rate Forecast

 
Rate Forecast
Aviation - All Lines: -5% to +5%

Recommendations

 

Aviation exposures are complex and have different risks from other types of businesses. Understanding these challenges is serious, so it’s imperative to work with a specialty broker to review your exposures and ensure compliance with the insurance company and the Federal Aviation Administration (FAA). Risk mitigation techniques for the aviation industry include:

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Enhanced risk management: Safety is critical and requires ongoing methodical commitment. Establishing a written safety protocol or safety manual for standard operating procedures is critical. Ensure that staff are aware of and following such procedures, which may include keeping tools and equipment away from heavy traffic areas. Make sure that hazards are well understood.

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Adequate insurance coverage: Ensure the right insurance coverage is in place to protect assets

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Operational considerations: Go beyond insurance policy requirements and invest in additional training such as upset prevention and recovery training (UPRT), the pilot proficiency program (FAA WINGs program), and model-specific associations. Obtaining additional ratings and certificates like instrument flight rules (IFR), airline transport pilot (ATP), and high-performance endorsements can reduce costs.

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Be informed: Know the policy. What does it cover, and are there any exclusions that prevent operations from being covered?

Aviation-Recommendation-SOTM-2024
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The contents of this report are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.