- Analysis of 32,000 industry claims over five years shows crashes and collisions account for 63% of the total value and a third of all claims by number.
- The expanding aviation sector is expected to see gross written insurance premiums (GWP) reach over $8 billion in 2024, the highest in 20 years.
- Increasing aircraft repair costs and a shortage of mechanics are likely to impact future claims activity. Meanwhile, ‘air rage’ claims have significantly decreased.
- Sustainability remains a major challenge for the industry, but new compliance measures may support progress in the green transformation.
Covid-19, the energy crisis, and Russia’s war have presented significant challenges to the aviation industry and its insurers. Nevertheless, the sector has made a strong recovery, with 2023 showing some of the best safety results on record. Global air passenger volumes are expected to reach an all-time high this year, up 10.4% year-on-year, with growth driven by the Asia-Pacific and North American regions. Despite the positive outlook, Allianz Commercial’s Aviation Risk, Claims, and Insurance Outlook highlights ongoing challenges.
The aviation sector is known for its high-value and high-profile claims within the global corporate insurance market. Analysis of over 32,000 industry claims from 2019 to 2024, totaling $15 billion (€14 billion), reveals that collision or crash incidents account for 63% of the claim value, while faulty workmanship or defective products account for 22%. In comparison, claims from natural catastrophes (4%), machinery breakdowns (3%), or fires (1%) constitute a smaller proportion of the total claim value.
“The aviation market is navigating a unique phase, disrupted by the pandemic and geopolitical conflicts,” says Tom Fadden, Global Head of Aviation at Allianz Commercial. “The sector’s ongoing expansion is set to drive premiums to a 20-year peak of over US$8 billion in 2024. We’re observing increased interest in multinational insurance and international placements across various business lines, driven by heightened geopolitical and regulatory concerns and a demand for well-managed insurance structures. However, insurers face ongoing challenges with well-documented losses and inflation affecting their profitability.”
In recent years, aircraft repair costs have risen significantly due to higher labor rates, increased parts prices, and inflation. The shift towards next-generation aircraft has further impacted claims, particularly in engine disassembly and repairs. Additionally, a shortage of skilled mechanics may affect future claims, as delays and inefficiencies could result in higher costs for parts replacement. The concern remains that these issues could lead to accidents, despite industry safety measures.
Cristina Schoen, Global Head of Aviation Claims at Allianz Commercial, notes that runway excursions are trending higher in 2024 compared to the previous year, with at least 23 reported globally from January to May, often due to weather and technical issues. Ground handling claims at major airports have also increased. While ‘air rage’ incidents have decreased since the pandemic, damage claims related to the rising demand for helicopter travel are on the rise.
The aviation sector, contributing around 2% of global emissions, is committed to reaching Net Zero by 2050. Despite the lack of a single solution for decarbonization, significant developments are underway. Sustainable Aviation Fuel (SAF) is gaining attention with new mandatory targets, and advancements in technology and innovations continue. The market for electric vertical takeoff and landing (eVTOL) aircraft is expected to grow, with the first insurance coverages for operational uses anticipated this year. However, the European Union’s Corporate Sustainability Reporting Directive (CSRD) and similar regulations worldwide, which require detailed ESG disclosures, could drive greater accountability and improvement in sustainability practices across the sector.
“Standardized reporting is expected to build investor and stakeholder confidence, highlight industry leaders in decarbonization, and enhance overall sustainability practices,” says Adam Tozzi, Head of Underwriting Global Tasks and Processes, Aviation, at Allianz Commercial.
“As Allianz approaches the 110th anniversary of issuing our first aviation insurance policy, we remain dedicated to managing volatility, selecting risks judiciously, and being a stable, long-term partner for our clients,” concludes Fadden.
