Aviation risk, claims and insurance outlook

To say that the aviation industry, and its insurers, have had to face significant challenges in recent years is an understatement. The sudden halt imposed by the Covid-19 pandemic hit the industry faster and harder than most others. Then, just as the industry was about to take off again and recover from pandemic pains such as staff shortages or supply chain bottlenecks, it encountered further turbulence from high inflation, the energy crisis, Russia’s invasion of Ukraine and potentially the largest single loss ever to hit the sector due to Russian confiscation of several hundred aircraft owned by Western aircraft lessors. All at a time when it was already facing the not insignificant challenge of the Net Zero transition.

The aviation sector has rebounded well from these difficulties. Although, the geopolitical environment remains uncertain, and airlines continue to face capacity constraints, supply chain disruptions and safety incidents, there are many reasons for optimism. Several 2023 parameters showed “best ever” safety results, according to the International Air Transport Association (IATA) [1].

In addition, while global GDP grew by only 3.2% in 2023, 1.3bn people traveled internationally, a year-on-year increase of +33%. According to UN Tourism [2], during Q1 2024, international tourism reached more than 285mn travelers, 20% more than a year earlier and 97% of pre-pandemic levels. This suggests that travel is increasingly being considered a ‘staple’ in many household budgets, with consumers willing to pay a higher price for the experience, according to our colleagues at Allianz Research [3]. In 2024, the volume of global air passengers is expected to hit an all-time high (+10.4% year-on-year), with Asia-Pacific and North America in the lead.

At the same time, the lack of a silver bullet solution for decarbonization should not take away from the exciting opportunities currently underway with the development of Sustainable Aviation Fuels  (SAF) and Advanced Air Mobility (AAM), to name just a couple of examples.

In this report, our aviation insurance team highlights some of the most important trends and challenges we see impacting the industry, from the rising number of runway incursions on the ground to growing GPS interference in our skies. Our experts also explore the impact of technological innovations such as AAM and electric vertical takeoff and landing (eVTOL) aircraft in particular, which offer the potential to revolutionize aviation, fostering sustainability, efficiency, and enhanced passenger experiences. They also examine how artificial intelligence can make aviation safer, more sustainable, and more satisfying for customers, while also shining the spotlight on some of the associated risks that must be considered.

Such innovations may steal the headlines when it comes to the sector’s flight path to a greener future but elsewhere, we also explain how one unheralded development may have the greatest impact on decarbonization overall – compliance.

Meanwhile, our team of claims practitioners identify the top causes of aviation claims we see around the world, while also keeping an eye on developing areas of interest, ranging from rising repair costs to a shortage of mechanics to the growing number of helicopter sightseeing experiences. From the insurer’s perspective, we also look at some of the ways in which today’s risk landscape is impacting the market, such as demonstrating the need for effective accumulation management or a growing interest in multinational insurance.

Of course, as the oldest continuously trading aviation insurer in the world, Allianz has always been at the forefront of pioneering developments, harking back to our very first aviation insurance policies issued in 1915. As the latest innovations and advancements sweep through the industry we look forward to this continuing.

Whether it is actively supporting eVTOL aircraft manufacturers through our solutions or playing a key role in the decarbonization transition by supporting companies via provision of stable capacity, sharing of best practices, or advising on the risk impact of technological advances or potential environmental exposures, Allianz Commercial has a crucial role to play in working with our trusted clients and partners to help de-risk businesses.

The continual growth of the aviation sector will see gross written insurance premiums (GWP) hit a 20-year high in 2024 of more than US$8bn. The standalone war market is also experiencing significant growth. Multinational insurance and international insurance placements are becoming more common due to geopolitical and regulatory concerns and a desire for a highly-managed insurance structure.

The push for Net Zero means the first operational eVTOL aircraft risk will likely be placed into the insurance market this year.