Airline renewals: Reinsurance pressures loom as market discipline tested

As the Q4 airline renewal season kicks off, the market is caught between reinsurers pushing cedants hard for higher pricing and direct underwriters wrestling competitive pressures to retain business amid an oversupply of capacity.

Market sources told this publication that reinsurers have communicated to the primary market they expect premium uplifts of 20% on all-risks placements, with a clear message that underwriters that fail to deliver material increases risk losing panel support.

Roughly 70% of the world’s airlines come to market to renew their coverage during the fourth quarter.

Direct underwriters canvassed by this publication are broadly aligned in ambitions to achieve rate increases north of 15% on all-risks placements, but the extent to which discipline can be maintained through the quarter remains a key question, given ongoing strong supply.

Adding complexity, Lloyd’s syndicates traditionally face year-end pressure to meet income targets, which has often encouraged softening late in Q4 as additional capacity comes into play.

In years past, this dynamic prompted some airlines to delay renewals until the final weeks of December in the hope of shaving a few points off pricing.

This year, however, the picture looks different, with several accounts coming to market early to secure terms and pricing, suggesting less reliance on the traditional end-of-quarter stand-off.

One broking source said that the usual “wait until the last week” strategy, particularly among US majors, may not hold across the board in 2025.

Early placements are being watched closely as a litmus test for whether reinsurer-driven discipline can override Lloyd’s end-of-year dynamics.

Meanwhile, high-profile losses such as American Airlines and Air India this year add impetus for insurers to increase prices, although there is uncertainty over the claims quantum and programmes that will respond.

With only a handful of major accounts coming to market before Q4, sources said it is difficult to take an accurate pulse check of the airline all-risks market before the frenetic renewal quarter kicks off.

However, one bellwether account – EasyJet – is understood to have priced up at its 1 May renewal, with this rate hardening continuing into the second half of the year.

Market practitioners also caveated that there was pricing differentiation depending on individual airline risk profile, exposure and loss history.

Elsewhere, hull war pricing is under renewed downward pressure from surplus capacity, with the recent Butcher ruling adding another dynamic to negotiations as they accelerate into the final quarter.

Capacity remains abundant

With the exception of Swiss Re CorSo’s withdrawal earlier this year, overall capacity in the airline market remains plentiful.

This abundance has moderated the immediate pricing impact of recent losses and given brokers more leverage in negotiations.

As this publication has explored, Lloyd’s has raised concerns about the adequacy of current pricing and hinted at possible restrictions on syndicates delivering weak results, but for now, buyers continue to benefit from the competition.

That said, senior management and capital providers are watching the class closely, and any new material loss could shift sentiment quickly.

If capital starts to retreat or scale back, a stronger upward rate correction could follow in 2026.

Hull war under renewed pressure

Within the aviation war segment, excess capacity is driving sharp downward pressure on rates.

Consensus points to reductions of around 15% on airline hull war programmes, with some brokers pushing for cuts closer to 20%.

Sources described how several incumbent leaders are quoting defensively, while new entrants have been seeking footholds by undercutting established players.

The conclusion of the high court "mega trial" over planes in Russia in the wake of its invasion of Ukraine saw the burden of the billions of dollars of losses fall on hull war underwriters.

However, the hull war market appears to be treating the outcome as already “priced in” following the sharp post-2022 recalibration.

In the wake of the conflict, hull war renewals saw rate increases of 100% across the board – regardless of whether an account had Russian exposure or not. The following year, rates increased a further 50%.

However, following the knee-jerk reaction of several insurers – including moves by AIG, Inigo and The Hartford – to pause or stop writing aviation war or AVN52 lines of business in 2022 and 2023, the aviation war market saw some carriers return and new capacity enter.

The total hull war premium pot has ballooned since Russia’s invasion, with hull war premium as a proportion of total aviation premium having tripled between 2021 and 2024.

Large claims unsettled

Heading into Q4, uncertainty remains over two major airline losses this year – American Airlines and Air India.

In the case of American Airlines, this publication revealed the airline was in negotiations with the US government to reach a settlement over the fatal Washington crash on 29 January 2025 which resulted in the death of 67 people.

While it remains to be seen what portion of the loss the government would pick up, the expectation is that it would pay a substantial portion of the liability claim and reduce the burden to the insurance market.

Elsewhere, questions have been raised over Air India and the potential for the war market to pick up the hull component of the loss, given that pilot intent has been suggested as a potential cause of the fatal collision.

The push and pull between reinsurers’ demands for sustainability and the direct market’s competitive dynamics will define the outcome for the airline renewal season.

But ultimately, the outcome will hinge on whether reinsurers can enforce discipline in the primary market in the face of abundant capacity, setting the tone not just for this renewal season but for the trajectory of the airline market into 2026.