The aerospace insurance industry is starting 2026 with solid capacity and competitive pricing, but it’s also facing some serious challenges. A recent outlook from WTW highlights that while insurers have plenty of capital available, they are dealing with rising costs and a shaky global situation that is making things more difficult behind the scenes.
Airlines usually set the pace for aerospace insurance trends, often showing changes before the aerospace sector follows. In the last quarter of 2025, insurance rates went up slightly but steadily. US airlines operating large, expensive widebody fleets took the biggest hit, seeing sharper rate increases due to higher claims costs and growing worries about “nuclear verdicts” in American courts. These verdicts are jury awards exceeding $10 million, and they have become a major concern for insurers. Recent data shows that from 2023 to 2025, American juries handed out more than $71 billion in such large awards. The median amount jumped to $44 million last year, up from $21 million three years earlier.
The National Association of Insurance Commissioners (NAIC) links this surge to social inflation, which is driven by factors like litigation funding and changing jury attitudes. Although aerospace insurers haven’t yet felt the full impact of these big verdicts, this could change depending on how ongoing major liability cases proceed.
Reinsurance is also under pressure. Insurers expected tough negotiations for 2026 renewals because of several big losses in 2025, including crashes involving American Airlines, Air India, UPS, and Jeju Air. Despite this, reinsurers only secured modest rate hikes in early 2026. Still, if costs rise too much in the primary reinsurance layer, direct insurers may have to keep more risk themselves, leading to tighter underwriting and potentially higher prices for customers.
Claims that aren’t related to major disasters already make up between half and two-thirds of global aviation insurance premiums, so insurers are dealing with significant losses even before reinsurance costs are added. On a positive note, long-term agreements are still available for accounts that show little growth and few claims. Growth in passenger numbers continues, with data from late 2025 showing flights beating pre-pandemic levels by almost 6%. The maintenance and repair sector is also facing increased risk since planes are being used longer due to delays in new deliveries.
Looking ahead, WTW says the aerospace insurance market remains relatively soft for now, but warns buyers to be ready if capacity starts to shrink. The situation became even more uncertain after the report was completed, as conflict involving the US, Israel, and Iran has closed airspace over parts of the Gulf. Insurers are now expecting at least a 10% increase in rates for areas seen as low risk. John Rooley from WTW described this as the biggest challenge the aviation insurance market has faced since the Russia-Ukraine war.
This mix of rising claims costs, legal risks, and geopolitical tension is putting the aerospace insurance market in a tough spot. Insurers, airlines, and customers alike will need to keep a close eye on how things develop in the coming months.