State of the Insurance Market Report
2025 Initial Outlook and 2024 Wrap-Up
Aviation Insurance
The aviation insurance market has experienced dramatic changes over the last several years. Rates are stable today, allowing for more capacity, broader coverage, and increased limits. While aviation clients have had higher premiums, adding new carriers and managing general underwriters (MGU) is enhancing industry competitiveness and contributing to the flat and lower premium increases we see in the market.
While rates continue to stabilize, the aviation underwriting market is becoming more competitive. Experienced underwriters move around the industry, changing carriers, and bringing new ways of doing business. There are also positive changes in carrier appetite, further enhancing the long-term health of the aviation insurance industry. With more competition, there is more capacity and lucrative opportunities for newcomers in the aerospace industry.
The aviation insurance market has seen financial losses from increased repair costs and higher claims liability settlements. This has led to significant rate increases, withdrawal of limits or coverage, and new or increased deductibles. Ongoing supply chain constraints on aircraft parts and engines will continue, along with a growing demand for maintenance, repair, and overhaul (MRO) facilities and businesses supporting parts manufacturing and other services.
In 2024, hundreds of orders were placed for newly manufactured aircraft. However, the backlog continues to reach record-breaking heights as manufacturers continue to work through challenges with talent shortages, supply chain issues, and safety concerns. Thousands of parts, such as fuselage, engines, and interior electrical systems, are manufactured all over the world, so there is stress in these industries to expand production.
While catastrophic air crashes are now far less frequent than reported over the last twenty-five years, the costs of repairs and parts have increased. Also, the cost of defending and settling third-party lawsuits rose. These increased costs will impact underwriters’ bottom line and put pressure on rates and premiums. Settlements that may have cost $1M in the past are now pushing into eight-digit figures.
Given some aviation exposures are global, combined with the unpredictable nature of international conflicts, the industry can be negatively impacted when hostile events occur.
A prime example is the Russia/Ukraine conflict. After 400+ Western-owned airplanes were confiscated in Russia following U.S. sanctions in 2022, aviation leasing firms sued insurers writing war coverage over war claims and aviation war hull rates and war liability rates increased.
Underwriters want highly experienced pilots operating the aircraft. Owner pilot and single pilot limits are capped on hull and liability by some markets, but excess liability options are more readily available to expand on the primary limit.
The shortage of skilled pilots and mechanics improved slightly in the past year for airlines, as they partnered with training facilities and universities across the country. However, training for general aviation pilots continues to suffer due to a lack of training sites, classroom capacity, and instructors, causing delays and lengthy wait lists. The only way to ensure a slot for renewal training is to schedule at least one year in advance. While underwriters require the training, they are also aware of the backlog. If you find yourself on a waiting list and you’re due for training, contact your underwriter for an extension. With the constraints on training, larger training centers are working to increase their capacity.
The shortage of pilots, mechanics, and controllers is also a serious problem and could impact the overall safety of the industry. Insurance underwriters are looking for experienced pilots and we recommend going beyond the training requirements outlined in the open pilot warranty.
As airline pilots reach their mandatory retirement age, some may find their way to commercial operators and corporate fleets, relieving the strain on pilot capacity.
Typically, inflation dampens leisure travel, but that’s not the case this year. Record numbers of people are prioritizing experiences and travel opportunities, and this demand is driving a new customer base for general aviation. Aircraft are less affected by inflation, as they generate attractive return premiums; thus, ownership of an aircraft will likely generate rental income until it is sold.
Because inflation affects sectors of the industry differently, businesses are turning to technology to improve operational efficiency, such as adding revenue for in-flight sales and other value-added services, which set them apart from their competitors. Aviation fuel costs have also stabilized, supporting an increase in air travel demand.
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 are following such procedures, which may include keeping tools and equipment away from heavy traffic areas. Make sure that hazards are well understood.
Adequate Insurance Coverages
Ensure you have the right insurance coverages to protect your assets.
Operational Considerations
Go beyond your insurance policy requirements, 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 your costs.
Be Informed
Know your policy. What does it cover, and are there any exclusions that prevent your operations from being covered?
For fresh insights on your existing insurance programs or to develop comprehensive and creative new solutions, our team of specialists is ready to help you manage your risk and prepare for the unexpected.
Download the Report
Our industry and product line specialists have collaborated to provide an update on current trends and market conditions. We invite you to explore their insights by downloading our latest State of the Insurance Market Report.