The aerospace insurance market is shaped by an array of interplaying dynamics including capacity, underwriting discipline, geopolitics, shifting exposures and activity in the wider aviation sector. While aerospace insurance capacity remains broadly healthy, several high profile airline losses over the last 12 months have meant that aviation insurers are scrutinizing underwriting decisions more closely across their portfolio. As a result, there are signs that the aerospace market is starting to transition away from its recent relatively soft phase.
This outlook explores the developments that are shaping the aerospace insurance market, from pricing trends and long-term agreements (LTAs) to the influence of major claims and strategic considerations for insureds.
Capacity and underwriting discipline
Despite ample underwriting capacity across most aviation lines, insurers are becoming more selective. This shift is not being driven by a lack of capital but by a growing emphasis on risk quality, claims history, and exposure management. Underwriters, potentially under the watchful eye of their senior leadership teams, are increasingly focused on technical pricing and are less inclined to support risks that they perceive to be underpriced. This focus is particularly evident in the treatment of complex risks, high-limit placements and accounts with a challenging claims history.
Capacity is still available, but it is being deployed more selectively
Capacity is still available, but it is being deployed more selectively. As ever in this type of scenario, insureds with strong risk management practices, transparent data and positive market engagement are better positioned to secure favorable terms.
Exposure growth vs. flat premiums
One of the more notable trends in the recent market has been the disconnect between rising exposures and proportional premium increases. Aircraft values, passenger numbers and general operational activity have all increased since the COVID-19 pandemic. Aircraft maintenance and repair costs have been constantly rising over the last decade or longer and claims inflation is a constant reality. Despite all this, for the last couple of years, aerospace premium levels have mostly remained static. This is primarily due to overcapacity and intense competition among insurers, which has prevented rates from rising in line with exposure or keeping pace with inflation.
This dynamic presents both opportunities and risks, but not necessarily for all parties. On the one hand, insureds have been able to benefit from favorable pricing despite increased activity. On the other, insurers face margin compression and must rely on disciplined underwriting to maintain profitability. This will not be sustainable in the long term, particularly given the airline loss activity and potential increase in management control of capital into the aerospace insurance market. With several insurers and reinsurers stating in their recent results that underwriting margins have shrunk over the last couple of years and citing aviation as one of the sectors driving this change, the risk is that market conditions could change with a jolt rather than gradually.
Long-term agreements: an indicator of market change?
Long-term agreements (LTAs) have been a feature of the aerospace insurance market for the last few years. The reason for their prevalence in some parts of the aerospace sector is relatively simple: for airframe manufacturers and maintenance, repair and overhaul (MRO) organizations, production timescales and industry mandated maintenance schedules mean relatively long revenue time-horizons. Similarly, for airports and air navigation service providers, the risk is seen as relatively stable, and insurers are willing to show commitment to long-term customers. If the price for the second year, the “cost of certainty” is reasonable, this makes LTAs attractive for both insurers and insured in some parts of the aerospace sector. By comparison, airline organizations, for example, tend to focus on the next three months because that’s when most of their tickets are sold and their revenue is generated.
More insurers now require premium increases in the second year of an LTA, as mandated by management
As we entered 2025, LTAs were still available with flat premiums for both 2025 and 2026 policy years. This is beginning to change as scrutiny on the long-term profitability of the aviation class increases. More insurers now require premium increases in the second year of an LTA, as mandated by management, particularly for higher-limit placements. In some cases, it is no longer possible to secure 100% capacity with flat premium for the second year of an LTA.
This isn’t the case for everyone, but where it is occurring, this shift presents insureds with a strategic choice:
Option 1: Place less than 100% on a two-year deal, leaving a portion to be negotiated as the second year approaches.
Option 2: Secure 100% capacity for the duration of the LTA, accepting a modest composite premium increase in year two.
If faced with this situation, careful attention should be paid to the structure of the second-year pricing. It is best that no supporting insurer is priced above the lead pricing in year two, as this could create complications at mid-agreement renewals where potentially these insurers will have to offer a better deal than the rest of the panel in order to continue their participation. To clarify, the second or subsequent years of an LTA are still called renewals because of caveats in this type of agreement for sales, claims history or reinsurance availability, each of which can trigger a renegotiation.
Recent losses will increase scrutiny
The airline losses at the end of 2024 and into 2025 are likely to be significant from an insurance perspective, raising the profile of aviation losses among insurers and their capital providers.
The losses are a reminder of the volatility inherent in aerospace underwriting. Even in a relatively benign loss environment from an aerospace point of view, the fact that there have been several large aviation claims over the last year is likely to influence market sentiment. For insurers, it reinforces the need for adequate pricing and justifies more conservative underwriting strategies.
Aircraft seizures in Russia: legal clarity and market impact
Separately, the ongoing fallout from the seizure of aircraft in Russia in 2022 continues to shape the aviation insurance landscape. Without going too far back into the details, up to $12 billion of western-built aircraft that had been leased by operators in Russia were confiscated.
It was generally considered that three distinct insurance markets were potentially liable to respond to the claims from this event:
Hull and liability policies: Purchased by airlines for a range of potential losses including theft.
Airline hull war policies: Purchased by airlines to cover war-related losses.
Contingent and possessed policies: Purchased by lessors in case airline policies failed to respond. Contingent and possessed policies are divided between hull and liability and hull war sections, similar to standard airline policies, but they have specific wording and clauses relevant to the aircraft leasing sector.
The hull war market contested liability for more than two years, arguing that the losses constituted “theft”, which is covered by hull and liability, rather than “confiscation”, which is covered by hull war. However, a mid-2025 ruling at the High Court of Justice, one of the three senior courts for England and Wales, determined that the claims fall within the scope of the hull war sections of contingent and possessed policies.
This ruling has several implications, but noting that more than three years have passed since the start of the Russia/Ukraine crisis, it could be suggested that the market has already reacted:
Hull war premiums increased significantly when the crisis began and have now plateaued at what the market appears to deem a sustainable level.
Excess AVN52 premiums have also stabilized following significant initial year-on-year increases. No further upward movement is expected in the near term.
Importantly, the High Court judgment could alleviate pressure on the broader aviation market. Many underwriters that write contingent policies for lessors also participate in aviation hull and liability lines. By clarifying that the hull war market is responsible, the ruling potentially reduces the risk of contagion across other lines of business.
Nonetheless, a few insurers are attempting to use the scale of the loss as justification to seek modest increases in liability premiums. Market competition and the availability of capacity are likely to temper these efforts in the near term. It is also worth noting that while the High Court ruling improves clarity around the situation, there is the potential for appeal. There are also several other related cases making their way through courts in different international jurisdictions that may take a different view to the High Court.
Airframe manufacturers and MROs: Rising turnover, careful observation
Elsewhere, airframe manufacturers and MRO providers are enjoying increased turnover, driven by a combination of order backlogs and the alleviation of recent supply chain disruptions. As both sub-sectors tend to be loss active (manufacturing as a result of major loss events and MROs from lower level but more frequent property damage loss events), this growth in activity translates into higher exposures for insurers, who are now seeking premium increases to reflect the elevated risk.
As with other segments of the market however, competition remains a powerful counterbalance. Insureds with strong safety records, positive historical claims performance, and proactive risk management can often leverage market dynamics to resist or minimize premium increases. Early engagement with underwriters and transparent communication about operational changes are key to achieving optimal outcomes.
Is the aerospace insurance soft market ending? Perhaps not yet…
While there are signs that the aerospace insurance market could be beginning to turn, it would be premature to declare the end of the softer market phase. Capacity remains abundant, and competition continues to restrain price rises. The balance does seem to be shifting, however.
It would be premature to declare the end of the softer market phase
Insurers appear to have become more focused on underwriting discipline, and there is less tolerance for underpriced or underperforming risks. The aerospace market is becoming more nuanced, with outcomes increasingly dependent on the quality of the risk and the strategy employed during renewal.
To navigate this evolving landscape, insureds would be advised to:
Engage early: Begin renewal discussions well in advance of the renewal date to allow time for negotiation and market feedback.
Demonstrate effective risk management: Highlight safety initiatives, loss control measures, and operational improvements.
Be strategic with LTAs: Consider the trade-offs between certainty and flexibility when evaluating multi-year deals.
Monitor market signals: Stay informed about legal developments, major claims, and shifts in underwriting appetite.
Outlook for 2025/26
The aerospace insurance market so far in 2025 has been characterized by a delicate balance between capacity, competition, and underwriting discipline. While premiums have remained flat in many areas, rising exposures, recent losses and the resolution of this phase of the Russian leased aircraft claims are leading to a reassessment of risk and pricing.
Insureds who engage proactively with the market, present their risks transparently, and understand the evolving dynamics will be best positioned to secure favorable outcomes. The soft market may not be over, but the landscape is beginning to shift.
Our Willis Airport Conference 2025 is taking place from 1–3 October in Athens, Greece. This year’s theme, ‘Gate to Great: What Will Drive Aviation Growth in the Future?’, sets the stage for an exciting programme filled with expert insights, forward-thinking discussions, and meaningful networking.