Aviation insurance to soar at a 20-year high in 2024

Collision and crash incidents account for 63% of claims in aviation insurance sector.

Amidst challenges, the aviation insurance market is set to reach a 20-year high in gross written premiums (GWP) in 2024, exceeding $8b.

The aviation insurance sector is facing increased claims costs due to a variety of factors, including hard landings, bird strikes, runway incidents, and rising repair expenses, revealed Allianz’s Aviation risk, claims and insurance outlook report.

“General Aviation will supply the lion’s share, generating approximately 47% of the total; Airlines will provide approximately 35%, Aerospace 14% and Contingent around 4%. Within these figures, the standalone war market accounts for roughly 13% of this anticipated premium ($1.1b), a staggering increase from 2021 when it accounted for just 4% of global GWP,” the report stated.

“Yet dark clouds continue to hover for insurers, with well-publicised losses and social inflation pressurising bottom lines,” Tom Fadden, global head of Aviation at Allianz Commercial, said.

“An increased focus on the cost of capital if the market softens could result in a quicker turnaround than in previous cycles. The role of regulators may be important here. They continue to actively monitor the insurance market to ensure satisfactory capitalization.

The standalone war market is also expanding, and multinational and international insurance placements are becoming more prevalent due to geopolitical and regulatory factors. Additionally, the push towards Net Zero is expected to introduce the first operational eVTOL aircraft risk into the insurance market this year.

Analysis of over 30,000 industry claims, valued at $15.1b over the past five years, revealed that collision and crash incidents account for 63% of claims value and 33% by number. 

This category encompasses not only major crashes but also hard landings, bird strikes, and runway incidents.

Faulty workmanship and defective products rank as the second highest cause of claims both by value and frequency, while natural catastrophes, including turbulence, are the third highest by claims value. 

Travel-related issues, such as property damage, personal injury, and baggage claims, rank third by number. Fire and slip-and-fall incidents are also significant causes of claims.

Recent trends show a substantial rise in aircraft repair costs, driven by higher labour rates, increased cost of aircraft parts, and inflation. 

Additionally, runway excursions have increased, with at least 23 incidents reported globally from January through May 2024, primarily involving hull damage.

Ground handling claims have risen, reflecting issues such as towing, fueling, and catering-related incidents at major airports. Pandemic-related layoffs have contributed to less experienced staff, further impacting claims.

Recent trends show a decline in certain 'everyday' claims, such as 'air rage' incidents and animal-related claims. However, the shortage of aircraft mechanics may lead to future claims challenges, including delays in repairs and increased costs for replacing parts.

The growing demand for helicopter excursions, including heli-skiing and heli-fishing, is also influencing claims activity, particularly in North America, Europe, and Asia.