Rising claims costs mean airline rates are inadequate: Starr's Crispe

By Michael Jones

April 4 - (The Insurer) - Escalating liability and attritional claims mean current rating levels in the airline insurance segment are inadequate, Starr Insurance’s UK and Europe head of aviation Dan Crispe has warned in Gallagher’s latest Plane Talking report.

Crispe said claims costs have been increasing at an “alarming rate” in recent years.

Based on Starr’s data, he said total airline hull and liability net premium totalled $1.65 billion in 2024. However, he said a post-pandemic increase in airline activity has resulted in a significant upward trend in attritional losses.

Attritional claims increased by $200 million between the 2021 and 2022 underwriting years, while 2023 and 2024 are both expected to face attritional losses approaching $1 billion, Starr data showed.

Two senior aviation market sources said that the potential inflationary impact of U.S. President Donald Trump’s tariffs on manufacturing costs, along with the price of repairs and replacement parts, is also likely to increase the airline market’s attritional claims burden.

“If tariffs make goods and spare parts more expensive, insurance claims will in all likelihood rise. This could mean that premiums may have to increase or cover may be decreased, otherwise insurers could face a significant potential margin squeeze,” said Elizabeth Wooliston, underwriting director at the Lloyd’s Market Association.

Crispe said that the airline segment needed to see positive rate change and premium growth to preserve current capacity levels, with the volatility of rate movement dependent on whether more capacity withdraws from the market after the exit of Swiss Re earlier this year.

Gallagher Specialty aerospace global executive Nigel Weyman said that the accumulation of large losses at the start of 2025 has led to greater scrutiny from senior management at some insurers, with the airline market on a path to record another loss-making year on a pure premium versus claims basis.

Weyman said early Q2 renewals have raised potential clouds for buyers and suggest the onset of a market shift as rating moves upward.

While excess capacity continues to temper the overall impact of the harder stance adopted by underwriters, Weyman said that a buyer’s individual level of exposure growth is becoming an increasingly important factor in renewal negotiations.