Geopolitical instability has emerged as the aviation insurance sector's single greatest threat, according to the latest annual survey from the International Union of Aerospace Insurers (IUAI), published jointly with the International Underwriting Association (IUA) and Swiss Re.

The IUAI Cyber and Emerging Risks Study Group 2026 Survey, based on responses from 106 aviation insurance and reinsurance professionals worldwide, found that geopolitical instability and war received 79 first-place votes, the strongest result recorded since the survey launched in 2024. US claims inflation ranked as the greatest operational challenge facing aviation reinsurers, ahead of market conditions and rate adequacy, while supply chain and manufacturing issues entered the industry's top three threats for the first time.

"The findings highlight a continued shift towards risks that are systemic, interconnected and often originate outside the aviation sector itself," said Florian Zierer, aviation underwriter at Swiss Re. "Geopolitical instability, claims inflation, cyber threats and supply chain disruption all have the potential to create cascading impacts across airlines, manufacturers, airports and insurers simultaneously."

The geopolitical toll on aviation insurance

The survey's findings reflect the practical reality of a market that has spent four years absorbing the consequences of geopolitical shock.

The Russia-Ukraine conflict led to the effective seizure of about 400 western-owned aircraft leased to Russian airlines, with lessors unable to repossess their assets due to Russian legislation and international sanctions.

A June 2025 Commercial Court ruling determined that insurers must provide compensation under war risk insurance for those stranded aircraft, with the case involving multiple aircraft and engines with insured values of over $4.5 billion. AerCap confirmed a judgment securing $1.035 billion, and the ruling is now subject to appeal, with outcomes expected to carry broad significance for policyholders holding war risk coverage where disputes over total loss may arise.

Furthermore, the impact of the Middle East conflict has to date been confined principally to risks within the region, but premium rates for aviation, marine hull cargo and political violence have increased sharply, and while capacity remains available, insurers are being cautious. Hull war insurers pulled capacity and imposed triple-digit rate increases following heightened Middle East tensions in mid-2025, a response that mirrors the familiar pattern of capacity withdrawal and portfolio review seen during previous geopolitical crises.

The risk beneath the surface

Although cyber ranked behind geopolitical instability in the survey, it remains a fast-developing concern for aviation underwriters.

From 2023 to 2025, the aviation industry saw a 131% surge in cyberattacks, with major airlines including Delta Air Lines, Qantas, WestJet and Hawaiian Airlines among those suffering significant operational and financial disruption. The 2024 CrowdStrike outage alone crippled Delta's operations, canceling 7,000 flights and incurring estimated losses of $550 million.

Meanwhile, WTW noted that as airlines and lessors digitize operations, cyber risk has become a critical exposure, with treaty renewals in late 2025 signaling reinsurers' cautious stance on liability layers that filter down to primary insurers.

Market outlook

Despite the accumulation of systemic pressures, the survey recorded consistent optimism.

For the third consecutive year, respondents identified artificial intelligence, new aircraft technologies and growing demand for aviation services as the sector's greatest opportunities.

The global aviation insurance market was valued at approximately $5.27 billion in 2025 and is projected to reach $8.88 billion by 2034, growing at a CAGR of 6.1%, underpinned by rising air travel demand and an expanding global fleet.

"The survey reveals meaningful trends in how the aerospace insurance market views both emerging risks and future opportunities," said Tom Hughes, director of underwriting at the IUA. "While concerns around geopolitical instability, inflation and supply chain disruption have become more prominent, there is also a clear and consistent message of optimism."