The aviation insurance market continued to experience elevated loss conditions throughout 2024, with multiple significant incidents but no major all-risk losses until late in the year, according to a report from Howden Re.
However, on Dec. 29, a Jeju Air aircraft crashed in South Korea, resulting in the deaths of all but two of the 181 passengers on board. The accident is now the deadliest civil aviation disaster in South Korea’s history and represents the highest loss of life from a single aviation incident since 2018.
Howden Re noted that the Jeju Air crash, along with other high-profile aviation events, highlights the need for continued vigilance in underwriting large loss scenarios. In early January, a collision between two aircraft while taxiing at Haneda Airport in Japan and an Alaska Airlines Boeing 737 Max 9 losing a door plug mid-flight further underscored ongoing safety concerns.
While neither incident resulted in casualties, Howden Re stated that the outcomes could have been significantly different under slightly altered circumstances, reinforcing the role of reinsurance in mitigating portfolio risk.
Beyond major incidents, attritional losses in the aviation sector increased due to inflationary pressures and rising costs for new aircraft, spare parts, and labor. These factors affected even the most profitable airline accounts and contributed to underperformance in other areas.
According to Howden Re’s aviation and space division, the most competitive accounts and new business opportunities remained in high demand throughout 2024.
Direct airline lead terms were typically 8% to 15% lower on a risk-adjusted basis, with more than double the required capacity available in many cases. Following insurers sought to match lead terms, though some had to accept significantly lower terms due to market conditions.
In the standalone war insurance market, pricing pressures began to stabilize after the sharp increases that followed Russia’s 2022 invasion of Ukraine. Howden Re reported that aviation hull war rates declined by up to 10% in 2024 as competition increased, while excess war liability rates remained largely unchanged due to continued capacity constraints and high original limits.
The aerospace sector saw a broad range of rate adjustments, with risk-adjusted pricing movements varying between a 10% decrease and a 15% increase. General aviation, which includes a diverse set of risks across multiple geographic regions, experienced more variability in rating changes.
Howden Re observed that while competitive pressures persisted across all areas of general aviation, underwriters continued to find profitable opportunities within niche markets.
Market trends suggest that downward pressure on airline ratings due to overcapacity is likely to continue into 2025. Additionally, Howden Re expects a greater focus on diversification, with insurers shifting interest toward general aviation, aerospace, and war-related risks.
The industry is also awaiting legal developments related to the multi-billion-dollar cases brought by aviation lessors over aircraft stranded in Russia since 2022.
Initial loss estimates for these claims reached as high as US$17 billion, though confidential settlements between insurers and lessors, along with aircraft purchases by Russian airlines, may reduce the final exposure. Howden Re noted that despite these developments, the dispute could still result in the largest aviation or aviation war loss in history.
The first court rulings on these cases are expected in early 2025, and insurers and reinsurers are likely to adjust reserves accordingly.
Despite the uncertainty surrounding the outcome, Howden Re said that risk-adjusted excess of loss rates in the reinsurance treaty market remained stable or slightly declined at the Jan. 1 renewals, as reinsurers took a cautious approach. Proportional capacity and commission levels also remained largely unchanged for the same reason.
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