The aviation reinsurance sector is preparing for potential changes as renewal discussions begin and industry conferences approach.
After a relatively stable Jan. 1, 2025, renewal season, reinsurers are now assessing the impact of several significant aviation losses and shifting market conditions that could shape upcoming negotiations.
Paul Smith and Dominic Riley, managing directors at Howden Re’s Aviation & Space division, point to two primary factors influencing current sentiment: an accumulation of loss events and heightened attention to retrocession arrangements.
In the first half of 2025, the market experienced two major incidents. The American Airlines loss in January, with its reserve still under review but expected to be substantial, and the Air India event in June, which has reportedly been reserved at more than US$400 million.
These incidents, along with the Jeju Air crash in late 2024, ongoing deterioration of previous losses, and the initial realization of claims from the Russia/Ukraine conflict, are shaping the outlook for both insurers and reinsurers. This trend may contribute to a firming of rates as the fourth quarter approaches.
“These losses are expected to flow through quota share and XoL structures, with American Airlines possibly affecting upper XoL layers, and Air India impacting the first layers of many all-risk general and, potentially, hull war-specific programs,” Smith said.
He noted that while capacity for non-proportional major risk business remains available, the cumulative effect of these events and ongoing attritional pressure could influence the structure and pricing of 2026 reinsurance programs.
The aviation insurance market has also been contending with broader economic pressures. Inflation and rising claims costs have emerged as significant concerns for both insurers and reinsurers.
Ongoing litigation regarding leased aircraft seized during the Russia-Ukraine conflict is another factor that could affect reinsurance capacity. If claims from these disputes are passed onto the reinsurance market, available capacity may shrink, reducing options for buyers. The outcome of these legal disputes remains uncertain, and their resolution could shift market conditions, particularly if significant claims affect reinsurance availability.
Retrocession pricing at the July 1 renewals remained mostly unchanged, but the American Airlines loss could prompt a reassessment of program pricing, especially as reinsurers review exposure in light of past loss development from years with lower retentions and attachment points.
Retrocession structures, which are typically triggered at US$400 million of original insured loss, may receive increased scrutiny. There is also speculation that potential government contributions could mitigate some of the impact on pricing and attachment levels.
The growth of managing general agents (MGAs) continues to be a prominent trend in 2025. MGAs’ ability to make rapid underwriting decisions has made them key players in aviation risk, particularly where traditional insurers face more extended governance timelines.
“MGA-led platforms continue to expand their role in the aviation space,” Smith said. He added that these platforms are positioned to respond quickly in a market that increasingly values speed, specialization, and defined risk appetite.
This development is likely to influence the design of Jan. 1, 2026, programs, especially in segments where responsiveness is a competitive factor.
Looking ahead to the second half of the year, the market is expected to take a measured approach as it evaluates first-half losses and monitors retrocession developments. While reinsurance capacity remains accessible, reinsurers may adjust their risk appetite, review retentions, and manage exposure in treaty and retrocession accounts.
Pricing in upper XoL and retro layers is expected to strengthen, and cedants may consider changes to quota share arrangements or program structures to reflect updated loss assumptions.
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