Airline insurance market to stay soft in early 2025: WTW

Excess capacity drove rates downward throughout the year despite efforts to tame this.

The airline insurance market is expected to remain soft in the first half of 2025, with early reinsurance renewals indicating that direct insurers will continue to negotiate amidst the momentum from late 2024, according to WTW. 

However, the potential resolution of Russia-Ukraine leasing claims could quickly shift market conditions by impacting reinsurer and insurer appetite, WTW’s Airline Insurance Market Renewal Outlook: Q1 2025 said.  

Despite efforts by airline insurers to raise hull and liability prices in 2024, excess capacity drove rates downward throughout the year. 

Unless there is a reduction in available insurance capacity, rate cuts are likely to continue in early 2025. However, competition for premium income, which intensified in late 2024, may ease as insurers reassess their positions. 

With only a limited number of airline insurance programs renewing in the first two quarters, market direction will be difficult to determine in the short term.  

Liability claims from recent airline incidents, including losses in Azerbaijan and South Korea in December, are unlikely to significantly impact the direct airline insurance market. 

However, insurers remain focused on rising composite airframe repair costs, expensive engine replacements, and inflation-driven liability claims. 

The American Airlines incident in January could result in substantial claims, but with limited placement activity in Q1 and unclear loss causation, its impact on the market remains uncertain.  

Unless another major loss event occurs or the aircraft leasing court cases result in financial strain for insurers, direct insurers are expected to remain open to negotiating favourable terms for risk management and insurance programs with strong loss histories. 

Given the market's susceptibility to change, airline insurance buyers must weigh short-term pricing opportunities against the long-term stability of insurer relationships.