Howden Re said the direction of the aviation and space reinsurance market will likely depend on how 2025 losses develop, following a series of high-profile claims that reshaped renewal dynamics heading into 2026.
A string of major risk airline losses over the past 12 months triggered market tightening in the fourth quarter of 2025. The events included the American Airlines loss in January, Air India in June, and UPS in November, following the Jeju Air crash in late 2024.
The ultimate insured costs of these events remain uncertain due to the long development tail typical of aviation liability claims. Unresolved issues, including potential government contribution in the American Airlines settlement, add to the uncertainty.
Dominic Riley (pictured above), managing director of Howden Re Aviation & Space, said the cumulative impact of these losses influenced renewal outcomes.
"Although the ultimate costs of recent losses are still developing, their cumulative impact has reshaped renewal dynamics heading into 2026, with selective rate increases on excess of loss programs and greater pressure in retrocession layers, while quota share structures remain broadly stable," Riley said.
At the January 1, 2026 renewals, excess of loss programs saw low single-digit rate increases depending on exposure changes. Hardening was more pronounced in retrocession layers than in first-tier non-proportional reinsurance.
Beyond the major losses, attritional claims and rising costs – particularly for advanced aircraft engines – have eroded airline premium bases, leaving limited margins to absorb large events. Gallagher said it anticipates continued technical rate increases in 2026, particularly for operators with US exposures or high-risk profiles.
Quota share arrangements remained stable in both capacity and commission levels. Howden Re noted that reinsurers have become reluctant to increase quota share support for major risk accounts, opting instead to maintain existing commitments.
The US airline market experienced more pronounced hardening, where overcapacity has been less acute and loss uncertainty is greatest. Market conditions improved enough in the fourth quarter to retain existing capacity levels but not enough to attract new entrants.
General aviation continued to soften following its earlier hard market phase, a trend that persisted through 2025. The standalone hull war market also saw further softening after sharp rate increases following the start of the Russia-Ukraine war.
Riley said the market is expected to remain stable absent further loss escalation, with insurers and reinsurers focused on measured hardening and disciplined capital deployment rather than aggressive growth.
