The aviation insurance market experienced a challenging 2025 as insurers confronted rising claims, complex risks and evolving regulatory pressures, according to Gallagher Specialty's Plane Talking Q4 2025.

Renewals in 2025 marked a turning point for the airline 'All Risks' market, with insurers seeking upward pricing adjustments after several consecutive loss-making years. Major incidents, including the UPS Airlines MD-11 total loss in November, further strained premium adequacy and highlighted the impact of high-value claims.

US-based airlines and those with substantial US exposure faced the greatest scrutiny, according to the report, with some insurers restricting capacity to manage probable maximum losses (PMLs) associated with liability awards.

Incremental rate increases were implemented but fell short of full technical balance. Attritional losses and rising claims, particularly for advanced aircraft engines, have eroded airline premium bases, leaving limited margins to cover major events.

Gallagher said it anticipates continued technical rate increases in 2026, particularly for operators with US exposures or high-risk profiles.

General aviation and local underwriting

General aviation underwriting remains highly localised. Premiums and risk assessments vary by region, reflecting legislation, market practices, and exposure-specific factors such as operational bases and hangar safety measures. Local expertise and personalised underwriting are critical for maintaining sustainable pricing and effective claims handling.

Meanwhile, the aerospace manufacturing and infrastructure sector has seen minimal premium changes despite geopolitical events, including Russia–Ukraine leasing claim resolutions.

Rising maintenance and repair costs, driven by material shortages, workforce scarcity, and exclusive OEM servicing of modern engines, have increased financial pressures on insurers. Even minor incidents, such as bird strikes, have raised repair costs by approximately 39% over three years.

Emerging risks and regulatory developments

Sustainability and climate-related risks are increasingly influencing underwriting. Airlines’ decarbonisation efforts and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) introduce new exposures, requiring insured carbon credits and creating potential bottlenecks.

AI and predictive modelling are enhancing risk assessment and pricing, though insurers continue to balance data-driven tools with human judgment.

Outlook for 2026

Looking ahead, Gallagher projects modest technical rate increases in airline ‘All Risks’ policies, further softening of Hull War rates, and ongoing scrutiny of US exposures.

Aerospace manufacturing premiums are expected to remain stable, though attritional losses and MRO risks will be monitored. The market remains delicately balanced, with major incidents or geopolitical events capable of triggering sudden rate or capacity adjustments.

Insurers and brokers will need technical underwriting, data-driven analysis, and strategic client differentiation to navigate these challenges, maintain market discipline, and ensure sustainable outcomes across the aviation sector, the report said.