The aviation insurance market should prepare for at least another year of elevated claims costs, with structural pressures showing little sign of abating. That’s according to McLarens Aviation, whose latest Claims Cost Index highlights continued increases across nearly every category monitored.
While the sharp post-pandemic spikes have eased, costs remain stubbornly high. John Bayley (pictured), global technical director at McLarens Aviation, said that attritional claims now cost significantly more to resolve than they did just a few years ago.
“Manufacturer price lists are showing steady year-on-year increases, around 7 percent on top-line items, continued strain in the MRO ecosystem, and rising labour rates across regions,” Bayley said. “For insurers and policyholders, this means that even relatively routine attritional claims now incur significantly higher costs than just a few years ago.”
Several interlocking factors are keeping costs elevated. Supply chain pressures remain persistent, with raw materials such as titanium still difficult to source and lead times for critical components extending further. Maintenance and repair are generally holding within the 5–10% annual increase range, but certain specialist areas are under heavier pressure.
Labour, Bayley said, is also a driver, with airline-side increases surpassing 7% in some regions and 5–10% in general aviation. At the same time, technological advances are proving a double-edged sword: while more efficient and safer, new-generation aircraft rely on composite materials and modern turbofan engines that can only be repaired with manufacturer support.
“These cutting-edge aircraft, and their components, often cannot be repaired using conventional methods. Instead, they necessitate specific manufacturer support, requiring specialist skills and equipment. Costs have skyrocketed as a result,” he said.
Looking ahead, McLarens expects these conditions to persist through the rest of 2025 and into 2026. Broader economic inflation may have moderated, but the aviation claims environment remains exposed to deeper structural challenges.
“Power-by-the-hour contracts, for example, have increased by 3–7% this year among major providers,” Bayley said. He added that there are no clear signs that the imbalance in labour, facilities, and critical parts supply will resolve in the short term.
High capital costs tied to new-generation aircraft technology, along with OEM pricing policies, are also set to keep pressure on insurers and policyholders alike.
To navigate this environment, Bayley stressed that insurers and policyholders alike need to recalibrate expectations. With claims values climbing steadily, he said that even when broader inflation cools, aviation-related costs are unlikely to follow the same trajectory.
This means that managing attritional losses, setting reserves, and negotiating settlements will all require greater realism about the true cost of repairs. For operators and insurers, that may involve closer collaboration earlier in the claims process to avoid surprises.
“Maintaining a realistic understanding of aviation claims inflation is important, especially since new-technology aircraft have no cost relationship with older models,” Bayley said.
Earlier this summer, Insurance Business also spoke with Steven Godfrey, head of aviation at HDI Global SE Canada, who echoed many of the same concerns – but from a slightly different angle. As Godfrey stressed, the problem is not frequency, but severity of claims.
“The cost of and availability of parts is driving claims inflation right now,” Godfrey said, pointing to widespread supply disruptions and a shortage of skilled professionals. Even when damage is relatively minor, aircraft can remain grounded for months if the right component can’t be sourced.
Those delays compound quickly when policies include coverage for rental or replacement aircraft, he explained, since downtime costs can ultimately eclipse the actual repair bill.
Coverage itself is also a factor. Years of soft market competition have enabled what Godfrey described as “coverage creep,” where features like pollution extensions, betterment, or extended rental limits became standard across a wide range of policies.
That means claims inflation is not just about higher part prices or labour rates – it is also about the breadth of coverages now in play when a loss occurs.
Where once a repair might have been $100,000, you can now be looking at half a million or more when the full package of coverages is triggered, he said.
Taken together, Bayley’s and Godfrey’s observations suggest that aviation insurers are being squeezed from both sides: by structural, industry-wide cost drivers and by legacy coverage expansions that amplify the impact of each loss.
