The aviation insurance market faced a tough year in 2025. Insurers dealt with more claims, tricky risks, and new rules, according to a recent report by Gallagher Specialty. Airlines, especially those in the US or with big US exposure, saw insurers demand higher prices to cover growing losses. This shift came after years of insurers losing money. One big event that hit the industry was the total loss of a UPS Airlines MD-11 plane in November, which put extra pressure on insurance premiums.
US airlines were under close watch, with some insurers cutting back on coverage to limit their biggest potential losses from liability claims. While insurers raised rates a bit, it wasn’t enough to cover all the costs from ongoing claims and routine damages, especially for advanced aircraft engines. This has made it harder for insurance companies to build enough reserves for major accidents.
Looking ahead to 2026, Gallagher expects rates to keep going up, mainly for airlines with US ties or those considered higher risk. Meanwhile, general aviation insurance pricing is very local, changing depending on where the planes operate and how safe the hangars are. Insurers rely on local knowledge to set fair prices and handle claims properly.
The aerospace manufacturing side saw little change in premiums, despite ongoing global tensions like the resolution of leasing claims related to the Russia-Ukraine conflict. However, rising costs for maintenance and repairs—fueled by shortages of materials, fewer skilled workers, and reliance on original equipment manufacturers—have made things trickier for insurers. Even small incidents, like bird strikes, have pushed repair expenses up by around 39% over the last three years.
New challenges are also emerging with sustainability and climate risks. Airlines’ efforts to cut carbon emissions and programs like CORSIA have introduced new types of exposure, such as insured carbon credits, which could create bottlenecks in the insurance process. At the same time, insurers are turning to AI and predictive models to better assess risk and set prices, though they still balance this with human experience.
For 2026, Gallagher sees modest rate increases for airline ‘All Risks’ policies and expects Hull War insurance rates to soften. US exposures will continue to be closely watched. The broader market stays fragile, with big incidents or geopolitical events likely to cause sudden shifts in pricing or coverage limits.
Insurers and brokers will need to rely on detailed underwriting, smart data analysis, and clear client strategies to keep the market steady. This approach will be key to managing risks and ensuring the aviation insurance industry remains sustainable amid ongoing challenges.