Aerospace insurance markets enter 2026 with capacity intact and pricing still competitive, but a string of costly claims and a volatile geopolitical backdrop are testing the sector's composure.

WTW's latest market outlook, released in early March, paints a picture of an industry caught between abundance and anxiety. Underwriters still have plenty of capital to deploy, which continues to give insureds leverage at the negotiating table.

Yet behind the scenes, those same underwriters are under growing pressure to justify their pricing strategies to senior management, particularly where profit margins have begun to thin.

Airlines lead, aerospace follows

The aerospace market has long taken its cues from the airline sector, typically with a delay and less volatility. That pattern held during Q4 2025 renewals, when rates edged upward in measured fashion.

Major US carriers operating high-value widebody fleets bore the brunt, facing steeper increases tied to claims inflation and rising concern over nuclear verdicts in litigious American courts.

The term refers to jury awards exceeding US$10 million, a phenomenon that has become one of the insurance industry's most closely watched pressure points. Data from Marathon Strategies showed American juries handed down over US$71 billion in such verdicts between 2023 and 2025, with the median award climbing to US$44 million in 2023 from US$21 million three years earlier.

The National Association of Insurance Commissioners (NAIC) has flagged the trend as a major driver of social inflation, fuelled by litigation funding, plaintiff advertising, and shifting jury attitudes.

WTW noted that aerospace insurers have not yet felt an adverse pricing effect from nuclear verdicts, as capacity and competition remain firm. How long that holds may depend on the trajectory of high-profile liability claims now working through US courts.

Reinsurance pressure, tempered outcomes

Heading into 2026, the expectation was for a bruising reinsurance renewal season. The 2025 loss record gave underwriters ample reason for concern: the American Airlines crash in January, the Air India incident in June, and a UPS freighter loss in November all followed the Jeju Air disaster in late 2024.

In the event, direct insurers negotiated outcomes that fell short of what reinsurers had pushed for, with excess-of-loss programs seeing only low single-digit rate increases at January 1.

Still, WTW cautioned that further cost increases at the primary treaty reinsurance layer could render it uneconomical, potentially forcing direct insurers to retain more risk on their own balance sheets.

That would likely tighten underwriting scrutiny and, in time, push price increases toward buyers. Attritional claims already account for an estimated 50% to 66% of total annual global aviation premium, meaning insurers are absorbing significant loss costs even before reinsurance enters the picture.

Long-term agreements remain accessible for accounts with modest growth and low claims activity. In airports, IATA data from late 2025 showed passenger numbers surpassing 2019 records, with 5.7% growth in November.

The MRO sector, meanwhile, faces rising exposure as maintenance demand climbs and aircraft service lives extend due to manufacturer delivery delays.

What comes next

WTW said the aerospace insurance market "had not moved away from its relatively soft position yet," though it urged buyers to prepare should capacity tighten.

Since the report was finalised, the risk landscape has shifted. The widening US-Israel-Iran conflict has shuttered airspace over multiple Gulf states, with insurers now eyeing rate increases of at least 10% for clean risks.

WTW's John Rooley has called the situation the aviation market's biggest test since Russia-Ukraine.