The aviation industry and its insurers have faced many challenges recently, including the COVID-19 pandemic, the energy crisis, and geopolitical conflicts such as the Russia war. Despite these obstacles, the sector is showing signs of recovery, with 2023 recording some of its best safety results to date.

According to Allianz Commercial Aviation Risk, Claims and Insurance forecasts, the number of air passengers worldwide is expected to reach an all-time high this year, up 10.4% year-on-year, driven primarily by growth in the Asia-Pacific region and North America.

The report highlights that the aviation sector generates some of the most significant and high-profile claims in corporate insurance globally. An analysis of more than 32,000 claims from the sector from 2019 to 2024, totalling $15 billion (€14 billion), shows that collisions, breakdowns, faulty workmanship or defective products account for 85% of the total value of claims.

Other incidents, such as natural disasters, machinery breakdown, and fires, account for a smaller proportion of claims by value.

Tom Faden (pictured above), global head of aviation at Allianz Commercial, noted that the aviation market is in a unique position due to the disruption caused by the pandemic and geopolitical tensions. He said the continued growth of the aviation sector could see insurance premiums reach a 20-year high of more than $8 billion in 2024.

“We are seeing increased interest in multinational insurance, and increasing enquiries for international insurance operations for entire programmes across business lines, driven by growing geopolitical and regulatory concerns and clients’ desire for a highly managed insurance structure. However, dark clouds still hang over insurers with well-publicised losses and inflation weighing on bottom lines,” he said.

Read more: Charting a Course Through Aviation Insurance Challenges

The report also discusses rising aircraft repair costs, which are affected by factors such as higher labor costs and the cost of aircraft parts. The shift to next-generation aircraft is also impacting claims, particularly for engine disassembly and repair costs.

In addition, a shortage of skilled aircraft technicians could lead to longer repair times and higher costs, as less experienced technicians may need to replace parts rather than repair them. There are also concerns that this shortage could contribute to accidents, despite current safety protocols.

Christina Schwinn, head of global aviation claims at Allianz Commercial, confirmed that runway excursion incidents have increased in 2024, with at least 23 incidents reported globally from January to May.

“We have also seen a significant increase in ground handling claims at major airports around the world,” Schwinn said. “Elsewhere, while ‘air rage’ claims have declined significantly since the pandemic, we are seeing an increase in damage claims resulting from increased demand for helicopter and short-haul flights.”

As the aviation industry seeks to reduce its carbon footprint, accounting for nearly 2% of global emissions and committed to achieving net zero by 2050, sustainable aviation fuels are gaining increasing attention, with mandatory targets being implemented. Innovations in environmentally friendly technologies, such as electric vertical take-off and landing aircraft, are also advancing, and the first insurance coverage for operational use is expected soon.

Furthermore, the EU Corporate Sustainability Reporting Directive and similar regulations around the world will require companies to disclose detailed information about their environmental, social and governance (ESG) performance.

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