Aviation insurers ‘being far more selective’ with capacity due to ‘significant attritional losses’

Aviation insurers are experiencing an uptick in attritional losses up to $10m (£7.5m) as out of touch policy wordings paired with an evolving – and more costly – risk environment cause underwriters to be “far more selective” around capacity deployment.

This was the consensus reached by a panel of insurers attending the Marsh Aviation Summit on 15 April 2026, held at the Park Hyatt London in Vauxhall, London.

According to Tom Breakey, deputy head of aviation for UK and Europe and global head of airlines at Starr, aviation attritional losses recorded by his firm – defined as claims up to $10m (£7.5m) – broke the $1bn (£0.75m) threshold in 2025 for the first time, versus a $700m (£526m) figure five years ago.

He told delegates: “To put that into context, the global market premium for airline business last year [was] around $1.85bn (£1.4bn). Now, that is a little bit fictional because there’ll be deposits that come off that and adjustments that aren’t fully earned. [But] that gives you a flavour of the money [that is] left in the pot, post the attritional losses.

“Unfortunately, there have been some major accidents over the last 18 months. According to our figures [for] the global airline total claims curve, 2025 will exceed $2.5bn (£1.9bn) and that’s off the back of a loss-making year in 2024.”

The impact of this attritional loss build up, Breakey noted, is that “underwriters are being far more selective” with their capacity.

He continued: “[While] we did see rate increases last year, they were moderated due to surplus of capacity. Now, capacity hasn’t particularly eroded, but certainly underwriters are being far more selective in their underwriting.

“There’s far more emphasis, and rightly so, on those accounts that have significant attritional losses relative to their premium income. We are seeing that momentum continue.”

Harriet Stewart, senior underwriter at Convex, agreed with Breakey that attritional losses had taken flight in the aviation sector. She added that “if [attritional losses are] the new norm, [this] is definitely something that underwriters need to keep an eye on”.

One unintended consequence that has been impacting attritional losses is aviation policy wordings, noted Matt Church, head of aviation at Sompo. He believes looser policy definitions are causing insurers to pay out on more claims than planned.

He explained: “The issue that we have as insurers is we’re providing, generally [speaking], policies with very large limits that are obviously designed for catastrophe events, which obviously we don’t expect there to be every year. But a lot of the policies are picking up [claims and there is] a lot of attrition due to going down to certain vertical levels.”

Causes of claims

The panel pinpointed a number of underlying causes that have been driving up aviation claims and affecting attritional loss figures.

For example, Nicholas Methven – senior vice-president and underwriting director at Global Aerospace – said he had seen “really expensive claims” in the maintenance, repair and overhaul (MRO) subsector of aviation where “newer employees” have been “making mistakes”.

He explained: “We saw this mass exodus [of talent] post-Covid, in terms of this brain drain. The newer employees, there’s a degradation in their soft skills. In this context, soft skills means being able to interpret a maintenance manual or tax card and asking the supervisor a question if you’re not feeling comfortable about what you should be doing next.

“That’s a concern and we’ve seen this manifest itself in some significant claims activity in the last few years. [This is] something we’re watching closely.”

Stewart, meanwhile, flagged specific supply chain risks around indirect tier three or four suppliers as being problematic due to these firms not having the same safety management system (SMS) standards as aviation clients.

“Could there potentially be the introduction of counterfeit parts?” she asked. “That’s on the rise.”

Repair and maintenance costs paired with supply chain struggles are having a big impact on claims and airline costs too, with Church confirming that “different industries [are] fighting for the same raw materials”, subsequently inflating costs for all. Breakey added that different materials used on “new generation aircraft” contribute to this as well.

Stewart additionally raised a concern around the age of engines and how airlines were having to potentially manage their risk portfolios differently because of this. For example, she observed that there are still a number of CFM56 engines in use – these were first used commercially in the 1980s.

She said: “We’ve still got CFM56s flying and I think airlines would want newer engines on their aircraft. Are they having to operate engines that they would [ideally] swap out [for] new parts? They don’t want to necessarily be flying [CFM56s] as much as the newer engines with fuel efficiencies. But are [airlines] having to operate their fleet differently [due to different engine types available] and what impact [does] that potentially have on risk?”

Breakey, however, was frustrated that there is not “the same level [of] investment in aviation infrastructure as [there is] with aircraft”.

Signposting aviation infrastructure as including MROs, ground handling, air traffic control and airport operations, Breakey said a lack of investment in these underpinning functions was creating an “impact on frequency and severity of losses”.

He continued: “Undoubtedly, the industry statistically [is] the safest it’s ever been – but, unfortunately, that’s not translating into improved claim performance. It’s quite a cause for concern.”

Jonathan Milford-Cottam, regional head of aviation at Allianz Commercial, added that physical damage losses are “definitely not short tail anymore, especially when there’s engines involved, because you can’t get them into a shop to get them looked at”.

He said: “The severity of damage is really difficult to tell at the early stage.”

No where to hide

The panellists agreed that it is currently a tough time for the aviation insurance market. The headwinds buffeting the sector are so multifaceted and all encompassing that aviation insurers are struggling to take advantage of portfolio diversification to balance their books efficiently.

“We’ve got challenges coming from multiple directions,” Milford-Cottam observed.

Church added: “Most underwriters have different portfolios of business in the underlying subclasses of aviation and normally if one has some issues, the diversification of the portfolio allows for a smoothening of that result. These issues [discussed] are across the board and that’s not really been seen before.”