Aviation insurance may be cyclical, but underwriters are increasingly questioning whether some long-standing assumptions still hold, particularly around deductibles and liability limits.
For Adam Hemingway (pictured), managing director, global aviation & space at WTW, the market is not being redefined. But it is being tested.
“Insurers have been saying for a long time that the current deductible levels are insufficient and too low,” Hemingway said. “I think they are at the same level as when the coverage was introduced, which was before my time, so at least 35 years ago.”
With repair costs climbing, that disconnect is more visible. “Especially with the cost of repairs increasing, insurers are concerned,” he said. “If you were to ask them what they would like to change, I think the level of deductible would be the one. You would probably say that our industry has outgrown that.”
Liability trends are also creating strain. “We are seeing levels of liability awards rising rapidly,” he said. “I think that is causing some insurers difficulties in trying to rate risks accordingly.”
For underwriters, the issue is pricing adequacy in an environment where legal awards, particularly in the US, are shifting.
“It is a bit of a strange market at the moment,” Hemingway said. “The hull war and the excess AV52 markets are awash with capacity, so there are no constraints there. But the Hull all-risk market appears to be at a crossroads.”
In Q4 2025, some large North American operators buying significant limits faced a squeeze. “Certain risks, particularly the bigger North American operators who are large consumers of capacity with big liability limits, found themselves subject to a capacity squeeze in Q4 of 2025, partly as a result of a perceived change in liability award regimes or trends in the US.”
Smaller buyers with clean loss records are still achieving reductions. “What we have already seen for certain operators - operators buying low limits, who have clean loss records and are also showing growth - is that they are proving that rate reductions are still available. But they are a niche part of the market.”
The real test will come as flag carriers renew. “I think the test of the market will come as the traditional flag carriers purchasing higher liability limits start to negotiate for renewal. That is when we will see where the market is at.”
Even then, competitive pressure may override discipline. “Regardless of the desires of the insurers to increase rates, they all have business targets to meet and reinsurance programmes to pay for. Whilst there may be underwriting discipline at the beginning, once it comes down to it, it could conceivably give way to people competing for shares. That leads to a lower or lesser increase in rates, or even reductions.”
Supply chain disruption continues to delay cost clarity. “One of the problems, particularly with the inability for operators to have their engines or parts inspected after incidents, is that the potential true value of any loss or incident is delayed,” Hemingway said.
“A claims reserve might not be forecast for months after an event, and that causes problems. It is harder for insurers to truly evaluate the cost of the risk and to see the true picture of the loss record.”
Even so, he does not see a structural reset. “I think the market is always temporary as we move through the cycles,” he said. “As we have lots of capacity, the Hull prices, for example, will reduce. But that will only be temporary, because if losses start to come back and capacity withdraws, that has the effect of capacity squeezing and prices going up.”
As high-limit programmes head into renewal, the coming months will reveal whether discipline holds, or whether competition once again defines the cycle.
