A complex renewal season beckons
As the airline insurance market turns its collective thoughts to the final quarter of the year when an estimated 70% of lead hull and liability premium is placed, conditions are ambiguous to say the least.
The third quarter is usually relatively quiet from a premium placement perspective, but this year there is a lot of focus on the airline insurance market, driven by three separate factors:
We have discussed the first two issues in detail elsewhere (see links above), but it's worth covering each briefly in turn. The High Court’s judgment on the issue of the aircraft leased to Russian carriers [1] has improved clarity around something that has been troubling the market for around three and a half years. There is still the potential for appeals however, and there are also further cases making their way through courts in other jurisdictions, so while there is less uncertainty around the issue, there is still some way to go before it can be seen as concluded.
Secondly, after a challenging set of claims at the end of 2024 and into early 2025, there have been further recent incidents. The loss of the Air India flight from Ahmedabad[2] is still being investigated but is likely to be a significant draw against hull and liability premium.
At the same time though, the American Airlines incident on June 25 [3] is a reminder of the airline industry’s significant advances in terms of both technology and training over the last few decades.
The third issue, the geopolitical environment, remains challenging, but recent events in Asia and the Middle East did not elicit the instant response from the insurance market than might have been expected.
The outbreak of conflict between Iran and Israel in June 2025 drew attention to the aviation industry’s vulnerability to geopolitical crises. Airports, as strategic national infrastructure, and aircraft, often adorned with national insignia, are both symbolic and literal targets, and insurers often respond quickly to any outbreak in hostilities, particularly in regions that are perceived to suffer from historic instability.
On June 13, Israel launched 'Operation Rising Lion', targeting Iranian nuclear and military facilities. Iran quickly retaliated by dispatching over 100 drones toward Israeli territory.
The immediate consequence was a sweeping closure of airspace across several countries including Iran, Iraq, Israel, Jordan, Lebanon, Syria and the U.A.E.
The situation escalated on June 22, when the U.S. conducted strikes on Iranian nuclear facilities. Iran responded a day later with missile attacks on U.S. military installations in Qatar. The airspace over Qatar was closed in the hours before the attack.
Airspace across the region gradually reopened as a ceasefire came into effect and tensions appeared to ease. Israel reopened its airspace on the night of June 25th, but operations in the region’s commercial aviation industry were constrained and there was congestion for several days afterwards. Operators in several countries had to grapple with restricted flight paths and increased air traffic, complicating airline scheduling and logistics.
Traditionally, geopolitical events of this nature trigger a flurry of Notices to Review and Notices of Cancellation (NOC) and premium reassessments from insurers. Despite the scale and immediacy of the conflict, the response from the insurance sector was relatively measured.
Several factors may explain this restraint.
Airlines have become increasingly sophisticated in their risk assessment capabilities over the last decade. Real-time data analytics, geopolitical intelligence and collaborative platforms have enabled aviation organizations to make better decisions more quickly than in the past.
This proactive stance is likely to have reassured insurers, reducing the perceived need for immediate policy changes or the issuance of notices.
The lines of communication between airlines and their insurers have also become more robust, and it is increasingly normal for operational updates and risk mitigation strategies to be shared in real time. This gives underwriters more confidence that risk is within tolerance.
Another possible explanation is the recognition by insurers that issuing NOCs or reviewing premiums may be ineffective in fast-moving scenarios. Situations could be resolved (or at least moved to a new normal) by the time the 7-day notice (which is applicable to either notices to review or to cancel) comes into effect. Instead, many chose to engage positively with their airline clients, prioritizing relationship management over administrative burdens.
This approach not only helps to preserve client trust, but it also allows insurers to maintain coverage continuity while managing their exposure.
It is also possible that the High Court judgment discussed above had an influence. Part of the judgment centered around what is known as the “grip of the peril” doctrine. Very broadly, the concept suggests that if it can be demonstrated that an issue that led to a claim commenced before a 7-day notice was released and the issue continued without respite even after the insurance policy had been withdrawn, a claim could still be valid because the claim took place while the hardware was said to be in the “grip of the peril” at the time of the loss. [4]
The “grip of the peril” doctrine has been part of the insurance markets for several decades. [5] Also known as being in death’s grip, it was developed by the marine industry, where there can be significant time between a ship suffering an incident that caused it to be lost, and the actual loss itself. If the insured can prove that the proximate cause of the loss was caused by an insured peril during the policy period, then the insurer is liable even if the actual loss occurred after the policy had expired. Aviation loss events tend to be quick and sudden, so the grip of the peril doctrine had not previously been applied in quite the manner it has been with the Russia claims.
There were aircraft stuck on the ground across the Middle East throughout June’s period of heightened tension, but it could be that the High Court judgment had changed insurers strategy to this kind of situation, making them more reticent to issue notice than they have been in the past.
That said, tensions very publicly ratcheted up between India and Pakistan during early May, leading to a four-day military conflict and the closure of airspace to each other’s airlines in the middle of the month. This occurred before the High Court’s judgment was made public, which suggests that while the “grip of the peril” doctrine could be a factor in the insurance sector’s measured response to the conflict between Iran and Israel, risk management, information sharing and engagement are also considerations.
The recent conflicts offer a case study in how the aviation and insurance industries can work together and adapt to sporadic geopolitical volatility and changing flight operations and ensure that people and cargo can keep moving as smoothly as possible.
From the aviation industry perspective, the emphasis on safety, operational agility and transparent communication with partners including the insurance sector proved invaluable. For insurers, the events highlight the benefits of flexibility, client engagement and the need to constantly evolve risk management frameworks.
The aviation sector remains a front-line witness to conflict. The response to recent crises in Asia and the Middle East demonstrates maturity on the part of both the aviation industry and its partners in the insurance sector. Both proved themselves capable of navigating uncertainty with resilience and foresight.
Geopolitical risks will continue to evolve, and so too must the strategies of airlines and insurers, ensuring that safety, coverage and operational integrity remain uncompromised.
As we discussed in our last outlook, capacity in the airline sector remains generally relatively healthy, which could reduce some insurers’ ambitions to manoeuvre the market towards harder conditions.
That said, conditions in the hull and liability market do appear to be starting to harden, particularly for airlines with high valued aircraft. There appear to be three main reasons for this: increased cost of repair for modern aviation equipment increasing the cost of attritional claims; challenges in the hull deductible market; and pressure from senior leadership to ensure that insurers to deploy their lines carefully.
Recently, there was nearly a further contraction in capacity as another insurer threatened to join Swiss Re[6] in exiting the aviation insurance market.
Whether this process continues or not, the likelihood is that discussions around airline insurance during the final quarter of 2025 will be robust. Airlines would be well-advised to engage early and proactively with their insurance partners as we approach the renewal season.
