’It’s likely that for the medium-term at least, a hard market for aviation reinsurance will persist,’ report says

The aviation reinsurance market could remain hard for some time to come as it continues to recover from large losses.

That was according to Gallagher Specialty, which highlighted in its new Q1 2023 Plane Talking report that there had been a series of “very large” aviation losses in recent months and years.

The report, which was published yesterday (12 April 2023), said global and social inflation, coupled with the volatile geopolitical environment, was affecting companies of all types around the world.

And following “unprecedented losses” from 2019 to 2021, it said there were repercussions throughout the whole of the aviation insurance and reinsurance market.

This included large rate increases being introduced by reinsurers.

“Retentions were reviewed, minimum rates on line re-examined and coverage restrictions introduced,” the report said.

“This move was already underway before the largest renewals took place and clients and brokers were given the warning by reinsurers that this is not likely to be just a short-term reaction.

“It’s likely that for the medium-term at least, a hard market for aviation reinsurance will persist.”

’Number of challenges’

Against this backdrop, however, the report said the aviation industry itself was beginning to show “green shoots” after the difficult years during the height of the Covid-19 pandemic. 

It added that the industry was predicted to return to almost pre-pandemic levels in 2023 as the demand for air travel continues to pick up after the lifting of travel restrictions.

However, the report warned there was still “a number of challenges for the airline industry”.

“[This includes] inflation, rising fuel costs, labour shortages and supply chain crunches to name a few,” it said.

“The industry is also faced with the challenge – and opportunity – of a transition to lower carbon, more sustainable fuel sources and the drive towards net zero.”

It added that time would tell whether the current market cycle would result in a return to healthy growth in the reinsurance space.

”But, we believe that learning from the lessons of the past and thinking about the changing risk outlook of the future will mean that the aviation (re)insurance market remains in good health for the medium-term,” the report said.