Geopolitics from 30,000 feet
The world’s political landscape has shifted considerably over the last couple of years, and aviation insurance has had to adapt to the changes. In the mid 2000s, the global system felt predictable, shaped largely by the post-Cold War dominance of the United States and a general trend toward free-market economic openness. Deals like the 2007 Open Skies agreement between the European Union and the United States symbolized the spirit of the age, opening major hubs such as Heathrow, Frankfurt and JFK to broader competition. The suggestion was that international air travel would steadily become easier as barriers to trade between the world’s economies were removed.
The last couple of years has seen that sense of steady progress give way to a more complex environment. Analysts currently describe the world as multipolar, with China, the EU, Russia, the U.S. and a group of increasingly assertive emerging economies exerting their own influences. Globalization has not disappeared, but it now competes with national priorities, regional disputes, and efforts to reroute supply chains for resilience rather than economic efficiency.
The result is a period of managed tension where major powers recognize that unrestrained economic conflict would be catastrophic but are still willing to assertively pursue their interests in ways that influence trade, travel, and security.
The aviation industry reflects this shift. Passenger demand has rebounded strongly from the pandemic slowdown, with global travel volumes in 2025 surpassing previous records set in 2019. Airlines are flying fuller aircraft than ever before, and load factors have hit new records across global markets.
Despite this strong demand though, the industry faces a more complicated operating environment. Supply chain issues have slowed new aircraft deliveries, forcing airlines to maintain older fleets for longer periods, while long detours around closed or risky airspace have increased fuel consumption and operating costs. This is a world of thriving passenger numbers but significant operational constraints.
Airspace has become one of the clearest illustrations of geopolitical tension. Since early 2022, Ukrainian skies have been off limits, and western carriers have avoided Russian airspace altogether. This has forced flights to and from parts of Asia onto longer routes, which in some cases has added hours to what were once straightforward journeys.
Tension in the Middle East has added further complications. In mid-2025, for example, airlines were forced to avoid airspace over Iran, Israel and Lebanon. The remaining air corridors over countries like Turkey, Saudi Arabia, and Egypt, already busy because of the need to avoid Russian and Ukrainian airspace, became densely packed.
With traffic funneled through fewer corridors, third‑party liability and excess war liability aggregations can rise at specific flight information regions (FIRs). Ensuring limit adequacy and monitoring stack sequencing in high‑density detour lanes such as eastern Mediterranean/Turkey and the Arabian Peninsula has become more challenging.
Insurers and airline risk teams monitor airspace changes more closely to avoid having to reroute or suspend flights, often influencing day-to-day flight-planning decisions to ensure coverage remains intact.
There are also deeper complications. At one point in 2025, U.S. regulators proposed restricting Chinese airlines from using Russian airspace on U.S.-China routes, on the grounds of maintaining fair competition with U.S. carriers who were already barred from such routes. While the suggestion was not implemented, it highlights how political discussions are shaping what would have been a purely commercial matter a decade ago.
The increased tension also increases the likelihood of gray zone activities, and aviation is an enticing target as state actors look to out maneuver each other without descending into open confrontation.
There is another aspect of aviation organizations getting caught in the crossfire of fast changing international relations. In a recent blog post, the International Air Transport Association (IATA) discussed the challenges that the aviation industry faces when governments move to block foreign currency transfers. [1] It estimates that there is currently around US$1.2 billion in blocked funds waiting to be repatriated into US dollars, creating cash flow challenges for both airline and aerospace organizations. The issue can be compounded by foreign exchange movements, which can be particularly dynamic during times of international turmoil and mean that when the blocked currency is eventually released, its value is different to what was expected.
Perhaps the most striking example of geopolitics intersecting with aviation insurance came when Russia retained hundreds of foreign owned leased aircraft after the invasion of Ukraine. This triggered massive claims as lessors sought compensation from insurers. A series of court decisions, including a major ruling in London in June 2025, clarified how war risk policies apply when aircraft are detained by state action.
These rulings are now reshaping how insurers write hull war policies and how lessors and airlines structure their coverage. Not long ago, the idea of an entire fleet being stranded by a major country seemed almost beyond hypothetical; now there is a real-world example that created one of the largest and most complex insurance events in aviation history. War risk and related lines have seen continued volatility due to large claims, active conflicts, and new uncertainties.
Other insurance markets have responded in varied ways, although general all risks coverage has remained relatively steady, supported by strong competition among insurers.
Aircraft manufacturing and supply chains are influenced by similar geopolitical pressures. A mix of post-pandemic disruptions, trade friction, and regulatory pressures have created shortages of raw materials, components and engines. The upshot is that major airframe manufacturers have been delivering fewer aircraft than planned, which can have competitive repercussions. [2]
Repair inflation, driven by costly parts and longer downtimes, coupled with rising legal awards, has also increased the severity of even minor claims.
In practical terms this means that airlines are paying more for leases, holding onto older aircraft, and juggling maintenance schedules which themselves have been made more unpredictable by shortages of both parts and staff. These challenges affect insurance exposures as well—older aircraft and extended repair times because of a shortage of both maintenance, repair and overhaul slots and spare parts, have increased both costs and risk.
Another major force shaping aviation is climate policy. Governments across Europe have introduced early requirements for airlines to use sustainable aviation fuel (SAF), even though global supply remains extremely limited – providing less than one percent of demand. SAF also costs several times more than conventional jet fuel, pushing up airline operating costs. While 10 years ago SAF was more of an experimental concept, it is now central to regulatory compliance, and differing national rules create uneven playing fields across regions.
While long established frameworks like Open Skies still exist, their practical impact is increasingly shaped by the new geopolitical realities. Open skies agreements continue to grant broad flying rights between major markets, but sanctions, airspace closures, and shifting political relationships often limit how fully those rights can be used in practice. In earlier years, the legal framework tended to match operational freedom; today, there is divergence.
Looking back across 10- and 20-year periods shows just how much has changed. In 2005 and 2015, globalization was strengthening, fleets were modernizing according to predictable schedules, and major geopolitical risks seemed remote. Regulation and insurance were focused on more familiar aviation hazards.
Today, the aviation industry must navigate an unprecedented level of contested airspace, legal disputes, supply chain weaknesses and uneven climate policy. Insurers now work more closely with airlines and lessors to ensure policies match rapidly evolving risks—from war risk exposures to maintenance delays caused by part shortages.
Despite the challenges and the heightened geopolitical pressure that the aviation sector finds itself under, new insurance capacity continues to enter the market, creating pockets of price competition.
As the aviation industry moves into 2026, analysts expect the multipolar world to persist. Aviation demand is expected to continue to grow, but not without challenges. Aircraft manufacturing is likely to recover gradually, but sustainability requirements will continue to add costs and complexity.
Insurance markets remain competitive in many areas but will need to stay alert to large-scale geopolitical and legal developments. Overall, the past two decades has seen aviation become a sector where political shifts, supply chain realities, and climate policy play a far larger role than before.
Aviation has always reflected the state of the world, and the level of geopolitical turbulence is clear in many aspects of the industry. Liberalization and globalization used to point toward smoother skies. Now, the aviation industry and its insurance partners are having to navigate an industry shaped by geopolitical tension, economic reshuffling, and environmental policy.
The challenge—and the opportunity—is to stay resilient and adaptable, ensuring that when the map changes, both operations and insurance coverage can change with it.
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