Aviation reinsurance market in good health but losses continue to weigh on sector: Gallagher

Richard Sammons, Head of Aerospace at Gallagher Re, highlights that while the aviation reinsurance market appears to be in good health, the balance is far from a buyer’s market.

Gallagher Re, a reinsurance broker specialising in risk management solutions, recently published Gallagher Specialty’s Plane Talking report – reinsurance, which provides an in-depth analysis of the aviation reinsurance market.

Significant aviation and space loss activity, including claims related to Boeing MAX, satellite incidents, and the high-profile Russia/lessor dispute, continues to weigh on the industry.

“The co-insurance placement of reinsurance with a long-term partnership approach can potentially restrict buyers’ choice,” Sammons explains in the report.

Despite this, a surplus of capacity and the advantages of strong cross-class relationships are creating downward pressure on pricing and encouraging reinsurers to commit to terms earlier than usual.

According to Sammons, reinsurance rate increases have softened in 2024, with some risk-adjusted reductions reaching up to 10%. However, larger airline insurance rate reductions in the direct market are compressing net premiums for insurers renewing similar reinsurance structures to expiry.

Sammons notes that this trend, combined with a stable retro rate environment and divergence between the direct and reinsurance markets, is likely to increase pressure on net underwriting results unless loss experience, deductions, or recovery ratios improve.

Insurer management is closely monitoring the situation as direct market rate softening continues, raising questions about whether aviation remains a competitive allocation of capital.

The unresolved Russia/lessor dispute adds to this uncertainty, keeping both direct and reinsurance markets cautious. December losses, including Jeju Air, have further impacted underwriting results, with Sammons highlighting their potential influence on capacity and sentiment heading into 2025.

In a market fraught with challenges, Sammons stresses the critical role of having the right broker. “Having the right broker has never been so critical,” he asserts, pointing to Gallagher Re’s bespoke risk management strategies and cutting-edge analytics capabilities.

The Plane Talking report emphasises the importance of strategic partnerships, informed decision-making, and tailored solutions in navigating today’s aviation reinsurance landscape.

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