The airline insurance sector is contending with increased claims costs driven by skills shortages, supply chain constraints, and inflationary pressures, according to a recent review by Willis.
In its Airline Insurance Claims Review 2025, Willis noted that while air travel remains one of the safest forms of passenger transportation, several factors are contributing to higher settlement costs for insurers.
Economic and social inflation have been key drivers, with Swiss Re analysis showing that while economic inflation averaged 3.7% annually between 2017 and 2022, social inflation reached 5.4% annually.
The broker highlighted that staffing shortages among maintenance, repair and overhaul (MRO) organisations, combined with longer lead times for spare parts, are affecting claims outcomes. Older aircraft, kept in service due to delivery backlogs for new planes, tend to require more extensive maintenance and are more likely to be declared constructive total losses following incidents.
Willis pointed to attritional claims as an area of concern. The cost of materials and repair complexity on modern composite aircraft hulls has increased, while airlines also face revenue losses when aircraft are out of service.
A previous Willis report found that only half of the 130 senior aviation representatives surveyed said their business model and strategy are resilient in the current risk environment.
John Rooley, CEO of Willis Aviation & Space, said: "There's a clear need to align risk planning with insurance strategies that are more adaptive and forward-looking."
The review also addressed the growing issue of psychological harm claims. Willis stated that where claims previously focused on compensation for physical injury, psychological harm is "somewhat more nebulous and certainly less clearly defined," complicating the settlement process.
According to Willis, there appear to be rising numbers of claims receiving so-called "nuclear judgements" where juries award payouts exceeding US$10 million. The broker warned these awards "tend to set the bar for future claims discussions, which runs the risk of creating a social inflation spiral."
On the operational side, the airline sector has largely recovered from pandemic-related challenges. Passenger numbers and cargo volumes grew in 2024 and continued to rise throughout 2025, with Asia Pacific expected to lead growth in 2026.
The broker examined artificial intelligence as a potential solution to staffing pressures but cautioned against over-reliance. Willis stated that AI "at this stage is likely to reduce administrative needs rather than operational staffing," with roles such as pilots, cabin crew, and MRO specialists requiring lengthy training that cannot be replaced by technology.
